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.
Well, like the Greek referendum in 2012, they came, they voted and stocks rallied. I am talking about the Crimean’s who don’t seem to want anything to do with the rest of Ukraine. How it all shakes out is a bit of a mystery, but some very select Ukrainians and Russians will not be able to go to their ATM machines anymore when they fly to London or New York. That message hit loud and clear as both Russian and US stocks rallied back a bit today.
At the money volatility got hit in all the big indexes as you can see from the Livevol Term Structure slice below.
Near the end of the day we have a pretty solid bounce in the broader market with stocks recovering all but 6 or so handles from the previous day’s highs. The reason for the selloff was kind of uncertain, so with just so-so retail sales, things are back up to nicer levels. As Mark discussed yesterday, the IV only made a tepid response so the bounce is not too surprising. The quick rally and inability to make new highs over the last 2 weeks has shaken up the upside skew a bit.
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Despite the headwinds of the Shutdown and the rollout of Obamacare, employers are hiring again. An economy that is growing and creating jobs is a good thing. While there was some concern about the Taper, that does not look like it will happen soon. That could change next week, but the soft landing is what the market is looking at.
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As of 3:30 EDT the market is flat lining just down about ¼ of a percent and VIX is up .33 with the VIX futures just flat on the day. For the most part, stocks have been leaning on a few things since the last blowout NFP.
There is a small sigh of relief in the ongoing Syria Crisis. Who would have thought that Mr. Putin steps in to be the humanitarian in all this? Starting the clock two weeks ago almost nothing has been to script. While the wags will parse the latest out of the State Dept. I want to look at something where the IV was actually up today instead of down.
There is nothing like a day to throw a monkey wrench into the works. Just as sure as we were (at least me) that somehting was going to happen with Syria it now looks as though something might happen with respect to Syria. The difference between will happen and maybe happen has a big influence on how the market prices volatility. What it means is that in the short term nothing really moves while the market prices for the fact that it might.
Right now with 20 Day HV trading around 10.88% the market is just not really moving. Tuesday was a big selloff but even with Fed minutes last week stocks just don't have much push one way or another. Today the market notched .65% up intraday. Still a small change move but not a 17% VIX.