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Cage match in the NDX

Stocks briefly flirted with new highs today, but look like they will close up for the day.  Slightly better housing news with a non-reaction to Thailand or Ukrainian violence also got the VIX to a 12 close.  I am not saying stocks can't drop, but the case for up to flat is getting better.  Part of the VIX is to forecast volatility in the future and for now there isn't any.

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SPY IV is getting hit hard as Memorial Day is celebrated a bit early

The Fed whispered it is looking at raising rates and we rallied.  Why?  Because higher rates mean economic growth and that is ususally good for stocks.  The question is really more out into 2015 but still the Fed mandarins are kicking it around and we rallied.  VIX got hit.  IV got hit.  Stocks felt the love with another run at a record probably a day or two away.

Stocks love certainty and a path for rates makes investors believe that things can get better.  We already highlighted the crazy term structure yestery in VXX and it is happening in SPY today.  The difference is that we are coming into the holiday and the liquidity providers are taking out the 3 day weekend faster than the US Army can take over Iraq.

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Was VXX invited to the party?

One too many mediocre earnings reports sent stocks swooning coupled with a “tough love” shout by one of the Fed bigwigs.  The simple reason is that stocks have run and the reasons to keep buying them are less compelling.  The big slowdown from the winter deep freeze keeps showing up in company earnings as many folks in the Midwest eastward stayed home and burned fossil fuel.

charts by www.Livevolpro.com

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DISH IV is high but will a deal get done?

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For now the very acquisitive DISH Network might be on the sidelines as the giant cable and communication industry goes through a massive consolidation.  T is looking to buy Direct TV and DISH is quietly sitting on the sidelines.  DISH tried to buy a cellphone company as an outlet for its wireless spectrum and they just could not get that done.

charts by www.Livevolpro.com

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Is the Biotech slide done?

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Stocks posted a slight gain today as the RUT stopped its slide somewhere midday.  The short jump we had in volatility ended with the VIX closing 12.44 down .73.  Without a reason to rally like early in the week, if there was one, stocks are on a meandering path for the short term.  The talk of European stimulus is not giving the market the same gas it did last year or the year before.  At this point, with earnings at the high end, companies need to make more money and for now that is a high hurdle.

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The bond rally no one saw coming

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We had a nice selloff today as thoughts of deflation gloom spread over the market.  Just remember that even in a bull market there are going to be down days  and some flat out ugly days as investors and algo guys read the latest headline and hit the exit.  Today was just one of those days.

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Who wants to buy the juice?

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The market drifts lower today and nobody seemed to care.  It is only May 14th and Summer is still a month away officially so this is a bizarre kind of complacency, or is it?  The volatility futures did have a little pullback priced in with the VIX trading near 12%.  The premium in the front month was a $1.05 on the close and a shade more yesterday.

 

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Is the Emerging Markets crisis over?

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As the SPX is about to make a new high today, I can’t help but think how ugly things were during the beginning of the year.  Argentina was in turmoil, riots in Brazil, and Turkey was in a near state of anarchy.  Has everything changed that much?  Judging from the chart below the market’s perception has changed a lot.  After nearly 4 months, volatility in the EEM is settling down and not bouncing back up.

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HSH options are cooking just in time for summer

The SPX managed to close at an all-time high today.  That makes investors happy with the 401k’s jumping to show some rosy balances.   The news that brought us here was nothing special.  Maybe the impetus was no bad news.  Stocks are in new territory and the drop in volatility seems to confirm the rally.

That story will get plenty of ink today.  Another story that is getting some ink is the Pinnacle Foods takeover by Hillshire Brands.  Jimmy Dean is going shopping and spending a few billion on new brand names.  For many companies it is easier to buy than build, so adding more to the Hillshire stable makes some sense.

 

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