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.
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.
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.
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.
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.
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.
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.
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)