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VIX Futures Fading Market Fear

While today has turned from extremely positive to a bit of a wash day, I think there is one important take away from today.  On Friday,  VIX futures were terrified of something happening in Syria over the long weekend.  Now, three days later,  VIX futures are not buying into VIX movement like they were on Friday.  Below is a 5 minute chart of the spread between VIX and VX Sep futures.  

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TD Ameritrade

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Is the market getting volatility fatigue?

There is nothing like a day to throw a monkey wrench into the works.  Just as sure as we were (at least me) that somehting was going to happen with Syria it now looks as though something might happen with respect to Syria.  The difference between will happen and maybe happen has a big influence on how the market prices volatility.  What it means is that in the short term nothing really moves while the market prices for the fact that it might.

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VIX down and OVX up

There is no doubt we have had a whippy couple of days.  Just when I though the Taper, FOMC and NFP were going to dominate the news along comes the Middle East dictator of the hour accused of using chemical weapons.  This is an unfortunate and sad chapter for Syria as the Arab Spring tries to flower in other countries.  For now rebels are stuck in a bit of stalemate and according to news accounts the Syrian Government is trying something new to break it.  That brings repercussions from the US and possibly the UN.  That is where we are and now the market wait

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Most of VIX move was SPX Price Related

Typicaly,  when the market is in actual panic it is somewhat easy to tell because the VIX out performs the SPX.  For instance,  last spring there was a 'vol run' on VIX where we saw the VIX over compensate on a sell off.  We saw something similar in June where the VIX popped somewhat aggresively in the face of a sell off of less than 5%.  Sometimes these point toward a major sell off, sometimes they point toward a bottom.  Yesterday was a classic example:  The SPX was down 7, the VIX was up over 1 point.

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There Might Be Something To This VIX Pop

Most of the day the market sat around and volatility imploded lower, however, when John Kerry Spoke at the end of the day, the markets listened.  Take a look at the movement the VIX pulled out of that speech:

 Tick chart - ^VIX - CBOE Volatility Index_window_screenshot.png

LivevolX (r) www.livevol.com

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FB turns 40!

We are back to the bizarro world of bad news is good news.  The housing numbers were not super great, although better than last year, but not enough to really thrill folks.  So the market assumed QE is on forever I guess with the T-bill rallying. There still is short term enthusiasm for bonds amid the undeniable trend of rising rates as QE starts to wind down.  As a friend of mine in college would say, "Let the funnies have their way."  

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VIX and Bond Prices: Near One and The Same

We continue to say that bond prices drive the market.  Here is some intraday evidence.  While they do not perfectly coorelate,  I think one can quickly see how smart paper in bonds (via TLT) and VIX are thinking along similar lines.

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LivevolX (r) www.livevol.com

I think the bond market is near calming down at which point so will VIX but the next day or so could be interesting.

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The volatility in MSFT remains eerily high

One of the really fun parts about this Fed juiced market as we approach an announcement  is that all the traders sit around and do nothing since we have to wait for what the Board of Governors comes out with.  I can remember trading for a decade and a half and what the Fed was doing was at the bottom of the list.   There was too much growth to contend with. We will know when things improve when each Fed minutes release take on less meaning.  The underwhelming VIX over the last couple of days signals we might be moving that way.

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Ten Year Driving Entire Market

It’s interesting watching equity traders try to explain the idea of the market being over bought or oversold.  When in truth the behavior in just about every market has little to nothing to do with what is going on fundamentally.  The 10 year note continues to deteriorate and is slowly creeping toward 3%.  With the rally in rates and sell off in bond prices the correlation between things like TLT and VIX.  Take a look at 5 Day tick chart of TLT and VIX

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Gold took off this week so is that it?

Equities are going to finish with a tough week.  The specter of Egyptian unrest, higher interest rates and the Fed tapering was enough to pull stocks from their lofty highs.  I will say the reasons for the last two mean that the economy is getting better which should be good in the long run.  In the short term the market has sold off 3-4% on the Tapering Boogeyman, so the selloff is not a total surprise.

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