The answer is at least two days. Yesterday and today.
Today retraced most of the goldilocks rally in stocks on Friday. 2 days pass and without any real good news (TPP failed in the Senate) stocks had a hard time mustering anything. Early morning bond selling started things off on the wrong foot too. The reality is the fear is just not there as the big elephant is rates and the ECB is content to plod along with bond buying until the Greece issue passes. We only catches glimpse of what will happen when rates start to reset. For now that is just not happening.
Yes, today there was a huge trade in the VIX pit. It is only news because its a slow day. While that is a big trade it is no where near the biggest that pit has seen and would essentially be a light sneeze in SPX. To make matters more interesting, that is not the VIX index that is going to be leading. Many traders are noting that the SPX has been the tail to the bond market's dog. Well the VIX is likely to head the same way. We have seen increases in IV of FX and Oil affect the markets.
Mark was filled on his 66 call for 1.25
Mark made a great observation yesterday on bond IV being relatively low. Today we had the 2% move and he was right. VIX is sitting in an interesting place as we are seeing 1% intraday SPX moves right now on the recent volatility in European bonds. If today was last year, the VIX future would have closed even with the old VIX cash.
The 10 year made one heck of a nasty move the last few days. This is killing the back end of the curve and long duration treasury funds, the most active of which is TLT. TLT was down more than 2 dollars today, and is down about 6 dollars in the last 5 days. Yet, even with all of this movement, ATM options, while juiced are probably not pricing in an IV high enough to handle all of this near term realized volatility. Right now, I can buy the ATM straddle expiring in 9 days for about 2.85. Les than 1/2 the move the ETF has made in the last 4 days or so.
As long as one of the big 4 (EU, Japan, USA or China) is still in the QE way stocks are bound to tumble on good economic news. USA is out, China thinking and Japan and the EU are in full swing. Today the EU is reaping the benefits of tough fiscal policy and looser monetary policy with growth looking better so stocks sold off. The strange result of QE is that good news is bad news for stocks and that is the present reality. To the extent this small selloff lasts will probably be answered by the ADP number in the morning. We will probably bounce on a middling number.
The VIX touched about the lowest level its seen all year hitting as low as 12.10. At the same time the SPX continued its threat to break out higher. And from what I am seeing I think it could happen as early as tomorrow. A pattern is developing of the SPX grinding in place, but seeming to have a trend that is slightly higher. At the same time, the VIX is absolutely trending lower.