I guess the Russians not invading the Ukraine is enough for new all-time highs in the SPX. I have not gotten in the way of this market yet, and will not start now. The thing I am looking for is what is on the horizon that will make IV move next. Most likely that is the employment numbers this week.
As we have stated, the SPX and the VIX are acting quite differently than the last time around. Previously, when the SPX was near 1840 the VIX was below 13, closer to 12.50. Now, with the SPX back at 1840 (getting there in a hurry), the VIX is between 13.75-14, and has not been able to break 13.50. In fact, adjusted for underlying price, SPX IV has basically stopped falling over the last 25 points or so. Take a look:
More testimony leads to another flat day for the market. After the rally of the last 3 days a rest was needed. The strangest thing is the volatility crept into the market and is just as fast leaving the market. VIX cash was down .20 today and all the volatility products pretty much followed suit.
Stocks got a breather today with the SPX up just .10% to 1798 near the close. VIX somehow forgot about the weekend and should end up around .02 today. For the first time in a while, no news produced a market that did not sell off like the last several weeks. Stocks did not give back the low volume rally on Friday either. It feels like if the emerging markets yawn, stocks here do nothing, and there was a bit of that today.
The ISM report was not great today. On the brightside, bad news is bad news again. Should stocks be at an all-time high with weak economic numbers? The answer is probably not. The steady exit from the emerging markets is continuing apace with investors leaving at a good clip. As far as I can tell, Argentina and Turkey are suffering real issues, but the rest of the EM world is just kind of moving along. It does not matter when money wants to hit the exit, they just jump.
Argentina devalued the peso today along with China providing less than stellar manufacturing data. It all added up to a mad dash for Treasuries and other safe havens like the Euro. What a difference a year makes. It was not too long ago that the run to above 3% in T-bills was a sure thing. At least, over the last few weeks coming into 2014 that is not the case.
As 2014 continues with the not much happening award, there are some big mark downs going on in the volatility markets. Stocks are sitting around, but volatility in the volatility products are hitting some very low levels.
Take VXX turning in 38% implied volatility with NFP still to come on Friday. It feels like paper has all but taken out the possibility of a move in VXX for this week.
2014 started off with a big thud. I do a radio podcast on The Options Insider Radio Network on Thursdays, and there was some speculation that the sell off was from longs needing to raise money to pay taxes. All the big names got smacked a bit after posting very good 2013’s. Conversely, gold is launching probably from an end to tax loss selling. The government is still in the market….
We are at the end of the year and with all of the big gains in stocks the laggards really stand out. I don’t know where gold is going the next few months but this year it has taken it on the chin. Just as it looked like it would rally into the end of the year, the tax loss selling picked up a head of steam forcing gold to price right on the year lows.