The market got a bit of a relief rally today. The hurricane was manageable and the employment picture was a bit brighter according to ADP so we had a very pleasant rally. Today was the first real smack down in volatility since the day before GOOG reported underwhelming numbers a couple of weeks ago. Anytime the VIX drops near 2 points it is a big readjustment in the volatility perception. Even with the election looming it won’t make much difference for the market if today’s IV markdown was any indication.
I won’t go through the VIX play by play today,because it was pretty straight forward. The VIX November (and sometime December) future spent a good part of the day underwater, in doing so, showing that the VIX futures were slightly backward. What does that mean? Move movement in the short term as 200 point moves in the down start to ignite the realized volatility in the market. My closet theory is that implied volatility will not drop until after AAPL announces. I have no real proof for that, but this whole scene feels like last spring when the market was sitting on the big news. It lo
One of the frequent questions we take in the daily pit report during earnings season is if premium is a sale into the earnings announcement. Usually we take these on a case by case basis, but one of the best ways to evaluate this is by taking the front month options and turning them into a pure play on the event.
Today we had the rally that never was. On the face of it, the US keeps getting glimmers of good news (jobs), and the Europeans keep getting bad ones (Spain downgraded). What does get the market going is hope of central bank intervention. Spain gets downgraded, and they will have to go to the ECB and then the crisis is solved, or that is how the market sees it. How do the banks see it? After all, they have vested interest in the flow of money in the US and abroad?
One of the most interesting things about market sentiment is how strange it is. After nearly a year of hanging on the hopes and aspirations of the Greek peninsula the market has forgotten what to do with good old fashioned news. The Beige Book was on the whole positive. Earnings reports on balance for some retailers were a little better than expected. The market looked at the news and went south. Good news can’t get us to rally so things are back to normal. Hmm…. So what is up?
The jobs market can breathe a sigh of relief today knowing that the unemployment rate dropped .3 of a percent to 7.8%. I am trying to remember the last time the percentage drop was that big, but it was quite an achievement considering the jobs numbers have been pretty anemic for months. For sure it has not happened in the last year (see my chart). My only guess is the employers were relieved that the Euro Crisis was solved and got hiring. I hope this is the start of a great trend, but of course, we will have to wait f
The market spent most of the day trying to decide if the ADP payroll report was going to be a good or bad precursor for the NFP number on Friday. I could almost see the tug-of-war going on between the yes and no camps all day long. One stock where the future was not in doubt was Hewlett Packard (HPQ ). The market hated it, and the name was down 13+%.
Wel,l we had a snoozer of a day just when the market thought it could catch a bid. The only thing that really got sold was the VIX. It pitched over the cliff to trade 15.71 by the end of the day. The seesaw around NFP on Friday begins. Since Bernanke can’t do a QE4 less than a month after QE3, the market seems to be reassessing the kind of move we can make. A decent report will give things a boost no doubt.
No talk about the VIX today. Option Pit covered the movements in the blog the last two days, so it is probably time to move on to the other VIX-like products. Other VIX-like products you say? Well, AAPL is so big that it has its own VIX, so let’s take a look at it.
Well, if you are Eddie Lampert, I guess this makes up for Sears. Since he is a smart guy, he will probably end up doing pretty well on both (if not already). But this is about AutoZone and the blowout the stock had today. The question is, if there is something to do, and if you are not, well, Eddie Lampert andget to see this as an opportunity to ride the momentum up.