For a brief second today stocks were starting to look good. It was better than a second, it was more like most of the morning into early afternoon, then the sadness came. Sadness came to TWTR on Tuesday and there was a bit of a let up today.
Note that vol. across the term structure got savaged by the close today. IV in June traded into the 50 handle and near term IV was down 15 points. What does that mean? Most likely there will not be a parabolic bounce in the stock.
We all know that the VIX is getting near the bottom of any range in 2014. Every time it's been near the 13.00 level, the VIX has bounced. What has been less discussed is how cheap options on VIX are getting take quick look at VVIX (the VIX of VIX)
The TWTR lock up ended not with a bang, but a plunge through the ice. TWTR closed on the lows and a new low since the IPO today. The action felt like a big lock up, seller wanted to get out as the selling was steady all day long. I am not sure that they are done yet.
TWTR seemed to drive down most of the social networking stocks and the wave hit banks and other names. With a near 1% drop in the SPX, the VIX was only up .51 points, which is a little light. The big reason is that implied volatility has been over priced for a little while.
Somewhere, as the market kicks around the all-time highs, the tech stocks are recovering from the shellacking they took. I don’t know if NFLX will see $400 this year or TSLA $255. We do have volatility in the large indexes scraping the bottom of the barrel so the big tech selloff has subsided for now.
The Fed surprised no one and is continuing to taper out of their bond buying program. While the real benefit will be endlessly debated, stocks have had a hard time making a whole lot of headway since the reductions started in earnest in Jan 2014. The 1-1.5% upside gaps seem to be a thing of the past unless stocks have come of a bottom.
Stocks have been making small gains over the last two days as the great tech sector rotation has moved from the new tech stocks back to the old tech stocks. The high fliers in 2000 are starting to fly again and the Young Turks in social networks have taken it on the chin as they drop like Icarus from the sky.