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RUT-SPX Vol Spread Getting Wider

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First, it was the vol of the NDX over SPX  that collapsed.  Now, it's RUT vol over SPX.  The spread between SPX and RUT vol is getting REALLY wide.

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9 is the new 10

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Looking at the market rip up on the surprising housing news and the old highs are in the rearview mirror as stocks race ahead.  Alex Jacobson, who I co-moderate the Options Block with on the Options Insider Radio Network, made a nice call last week watching the Dow transports make new highs and thinking the broader market was not too far behind.  1909 on the SPX and counting today as the shorts are going to have a hard time answering on this one.

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Looking for bargains in a non-bargain market

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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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