In yesterday's blog we discussed how the VIX was not impressed by this rally. Today I think its safe to say that the underperformance of the index pretty much confirmed. VIX correlation to its underlying is one of the best way's to call a pop and this was no different.
The S&P 500 is in what appears another decent sell off. At the lows today, it was near levels that we saw in the sell offs surounding Greece. In fact, with another similar drop to today, the S&P would be right near that recent low close. Yet, take a look at the option market. While during the Greek Crisis VIX touched into 20, This time the VIX has barely touched 16 and does not seem to be a threat to get to 20 with out another bigger push lower.
So far this earnings cycle we have seen big wins in tech out of GOOG, NFLX, and no AMZN. Flops have come from AAPL, IBM, and MSFT. Take a look at the pricing of AMZN from today (now up about double the straddle price).
Livevol (r) www.livevol.com
AAPL and MSFT got a black eye tonight on less than stellar earnings reports. I think that represents around 20% of the market cap of the NDX. All those that have been calling for the demise of stocks will have reason to cheer today. Our rally to all-time highs got derailed by something normal like reduced earnings forecasts instead of Greece, QE or some other macro mess. While financials and tech have powered us to all-time highs, energy, oil and metals are hitting some near term lows.
NFLX had earnings today and the stock moved 17.00 dollars, rallying past 115. The straddle was pricing in a move of less than 10 dollars yesterday. Hey, surprizes happen...however NFLX has outperformed its earings straddle for 4 straight quarters, ever since they started producing their own content. Take a look:
www.livevol.com LivevolX (r)