butterfly

Euro Bust

Stocks made a little run down today on bad UPS earnings and some worries about the weekend vote in Greece.  If folks are paying up for SBUX coffee, things cannot be that bad so we will blame the Greeks. Even after the ECB made their made policy announcement the Euro continued to sell off.  I guess the question is why would you buy European sovereign debt?  Spain yields nothing, you have to pay the Germans and Greece is always on the brink of default.  The 10 year Treasury is still looking pretty good even after the dollar rally.

 

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Seismic shifts in the Euro Zone

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Any domestic news today was overshadowed by the Swiss pulling the currency peg on the Euro.  The old 1.2 SWF to Euro is gone as the two quickly swung to parity.  This led to a rip in the Swiss stock market to the tune of a 10% drop.  To put that in perspective the SPX would be down 200 handles on the open for a move like that.

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The sell off lacks VIX

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2015 is starting off as the year of many swings.  For all the big daily moves in 2015, equities have not really gotten anywhere.  The post-FOMC rallies are fueled by the notion of lower rates and we run.  Then the sad realization of why we need lower rates hits and we sell off.  The only think I can say for this year is that the swings are solid and VIX is off the basement floor.

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VVIX down but VIX has it hair on fire

The current confluence of issues is the Ruble (Poor Vlad!), emerging markets and oil.  News in the USA after the Senate passed the spending bill is actually quite good.  Good numbers and low oil prices should set a nice stage for 2015 except you would not know it from the drop today.

Stocks dropped, VIX dropped and the vol. of VIX dropped.  The biggest reason for a drop in VIX vol. was the non-event over the spending bill but we still have a VIX over 20%.  SPX had a 38 point range or just about 2%.  The underlying flow of lower oil, unstable high yield emerging market bonds and tumbling currencies is enough to give traders worry.

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Mario plays Three Card Monti and wins

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The ECB had their big announcement today and, drumroll, they are going to do nothing else.  I think after watching QE in the USA and the never ending printing press in Japan, Mario Draghi is content to let Europe limp along and figure out a way to pay off its bills.  He will keep hinting at stimulus and  support but will not do anything.  He does not have to since the promise of liquidity is enough to keep the credit wolves at bay.

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Buy the rumor and sell the BABA

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Stocks are struggling today to make it to another record for the S&P 500.  As of right now a little push at the end of the day should do it.  Without anything news worthy I don’t expect stocks to do a whole lot.  A stock that has been doing a lot is BABA.

Alibaba Group Holdings, BABA has been on a tear since mid-October as it held up better than just about everything else with the stuff hit the fan not too long ago.  Chinese equities have done ok since then but nothing like BABA. Yesterday was the big Singles Day retail extravaganza and BABA pulled in more of their share.

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Realized vol show no signs of slowing down

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Did the Fed just do another QE? Or did I miss something?

Maybe it was the Europeans or maybe it was some jitters in China or Africa.  The FOMC suddenly lost it zeal for raising rates.  The economy here has been growing but not enough to satisfy our rate mandarins.  Maybe it is the TWTR/FB world of instant gratification but it takes time to get off the QE band wagon.  The Europeans are  in the tougher boat of restructuring economies since they cannot borrow at the rate they used to so they can pay all the benefits.  It does not look like Super Mario is going to finance that.  Better to have slow or even growth from restructuring than souped up QE.

 

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What is up with WAG?

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Step into the Wednesday time machine and not much happened between then and today.  Traders have been so lulled into a stupor with the lack of movement that they bid volatility up to 15% yesterday when it looked like there was another crisis brewing.  As of today no crisis, as holders of GOOG and other earnings reporters rejoice in the upside surprises.

 

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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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