One thing I always like to keep an eye on is how 'high fliers' perform in sell offs. In these most recent sell offs 'loved' names like TSLA, AMZN, GPRO, and AAPL have gotten a bit of a smoosh. One 'loved name' that did exceptionally well in this sell off is FB. While AAPL dipped to 108, and GPRO back to 55, FB stayed somewhat healthy never breaking 74.
The stock market got a gift from the FOMC minutes release today by leaving the status quo largely unchanged. I guess there is enough jazz in the mix with oil prices, Russian solvency and high yield debt tfor the Fed to chew on for a while. There has been plenty of volatility to go around with VIX trading just over 23 today on a run down to the 19s.
I have been saying for a few days that the coorelation between Oil and SPX is kind of dumb and non sensical. Close observation of the coorelation shows that often SPX sells off with Oil, but once Oil stops selling off SPX would rally.
Now take a look at what happened today. The SPX rallied with Oil mid-morning with a high in the SPX over 18 handles. Then, as WTI and USO sat, the SPX dove on Russia fears and maybe the Fed.
The current confluence of issues is the Ruble (Poor Vlad!), emerging markets and oil. News in the USA after the Senate passed the spending bill is actually quite good. Good numbers and low oil prices should set a nice stage for 2015 except you would not know it from the drop today.
Stocks dropped, VIX dropped and the vol. of VIX dropped. The biggest reason for a drop in VIX vol. was the non-event over the spending bill but we still have a VIX over 20%. SPX had a 38 point range or just about 2%. The underlying flow of lower oil, unstable high yield emerging market bonds and tumbling currencies is enough to give traders worry.
Stock got pasted again today despite the good consumer confidence numbers and retail sales. Oil prices are going even lower and that should be good for the consumer too. The retail index is holding up pretty well despite the 1.5% selloff into the close. What has gotten the VIX futures in such a funk?
By the end of the day VIX cash has shot way up as players are avoiding the risk on the weekend. Maybe there is not a budget bill and folks are nervous. Something is definitely afoot. Maybe the oil drop is too much of a good thing?
Henry Schwartz of Trade-Alert passed along a pretty nifty chart that shows the type of move the market has had in the last 3 days. It is a chart of term strucutre in VIX and implied volatility of VIX options.
Today, the SPX settled down .49 points. This will show up as essentially as a 0 in realized volatility terms as measured by GARCH which is what most brokerage firms use to measure HV. But does that tell the whole story?
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The ECB had their big announcement today and, drumroll, they are going to do nothing else. I think after watching QE in the USA and the never ending printing press in Japan, Mario Draghi is content to let Europe limp along and figure out a way to pay off its bills. He will keep hinting at stimulus and support but will not do anything. He does not have to since the promise of liquidity is enough to keep the credit wolves at bay.