Somewhere along the line stocks stopped worrying about China, oil prices and mass currency devaluations. My sense is that stocks like certainty and for now neg interest rates, while crazy, are at least certain in several G7 countries. Let put that aside as stock rocked to the sandbagging JPM as the financials showed up today. The big daddy lately has been oil and with the Doha OPEC talks this weekend my thoughts turn to gamma.
The VIX got blasted today, so did the front month of the VIX futures term structure and SPX premiums. VIX premiums on the other hand...not so much. There continued to be hudge demand for both VIX puts and VIX calls in May, June, and July. In fact, while VIX has been choppy, VIX option vol has been pretty firm and rallying. This is likely due to earning season, and the issues in Japan. But, none this less this should be noted as it seems the smart money is less than convinced by today's rally.
Stocks got a nasty jolt this morning when the ECB took a step into the unknown with a continued push for negative interest rates in the EU. 6 years ago when things needed a jolt I can see the Monetary Priming have a material affect that was so lacking in the 1930’s. Now that we are in round 6 or 7 the diminishing returns are in. Volatility got a massive bid up.