Another toxic brew for stocks today as equates drifted down around 1+% for the day. None of this was really attributable to the numbers. ADP was ok but the Ebola, HK, Russia, ISIS concoction of market sadness kept sentiment weak. Note how all the problems are more political than anything else. They need the will to solve them. This did drive IV up to some higher levels so those with some dry powder listen up.
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More Yellen testimony hurt the RUT and VIX today as both those indexes made some pretty good size drops. With a lot of old tech like MSFT and especially INTC, starting to trade at multiples out of the single digits what is volatility to do. A client wrote me today and asked if CSCO is next? All of a sudden establish companies are doing something not many thought possible a year ago and that is deliver some growth.
One of the most interesting things as the quarter pulls to a close is to see where the money is going today. It is not going to NFLX, GOOG and FB. After taking a good pasting the last couple of weeks, the darling stocks have not been able to get up off the mat. They are still up a bit since January, but definitely off of the nosebleed levels of a few weeks ago.
I am of the belief that politics will trump economics when it comes to the stock market. What I mean is, one politician can do more to destroy (or help, but rarely) an economy with the stroke of a pen than all the good earnings reports combined. Lately, that politician has been V. Putin since the Russians loss at the Olympics. He has been all sorts of grumpy and decided to take over a small piece of the Ukraine to make himself happy.
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Goldman put out a comment prior to earnings season, which was something that I happened to agree with. It basically pointed toward the fact that, while the VIX was overpriced relative to market movement, it didn't mean the component parts IV's were necessarily overpriced. Their main point was that it might not make sense to sell premium in individual names; in fact, they might be a buy. At the same time, SPX IV is probably still a sale.
Post-earning trade is one of my favorite times for a stock. The news is really is inconsequential except when put against the underlying movement. I do think stocks tend to trend a bit after earnings (no science behind that, just observation) but what happens when the report lands with a thud? The name is kind of directionless and I think that too is a trade. There are ways to make money on stocks that go nowhere using options.