As long as one of the big 4 (EU, Japan, USA or China) is still in the QE way stocks are bound to tumble on good economic news. USA is out, China thinking and Japan and the EU are in full swing. Today the EU is reaping the benefits of tough fiscal policy and looser monetary policy with growth looking better so stocks sold off. The strange result of QE is that good news is bad news for stocks and that is the present reality. To the extent this small selloff lasts will probably be answered by the ADP number in the morning. We will probably bounce on a middling number.
Stocks ended the week in an ugly fashion with the SPX down about 1.25%. There was enough in the bad sentiment train with Greece, Euro Area deflation, poor GDP and Russia annexing another part of the Ukraine. Not the stuff of rising markets with earnings only tepid this season. So far most companies that are reporting are doing better than estimates. Not 80% to blow it out but just ok.
One thing I always like to keep an eye on is how 'high fliers' perform in sell offs. In these most recent sell offs 'loved' names like TSLA, AMZN, GPRO, and AAPL have gotten a bit of a smoosh. One 'loved name' that did exceptionally well in this sell off is FB. While AAPL dipped to 108, and GPRO back to 55, FB stayed somewhat healthy never breaking 74.
Today, the SPX settled down .49 points. This will show up as essentially as a 0 in realized volatility terms as measured by GARCH which is what most brokerage firms use to measure HV. But does that tell the whole story?
LivevolX (r) www.livevol.com
As I look at VIX, I believe it might finally be ready to break. There are a few historical things that point toward a drop:
1. We are entering the holidays, always a time when things tend to drop
2. There are very few economic data points coming out till next friday.
3. And finally there is this:
LivevolX (r) www.livevol.com
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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From Wiki: The Hindenburg Omen
Today the SPX finally broke its streak of not closing up or down 1%. While that is certainly important to note, it is not the most important thing that happened today. What most important is how flat footed a few trader got caught. While the S&P moved, the VIX exploded. The VIX moved from the low 11's to almost 15% in one day, in what turned out to be an exceptionally short period of time.
For a brief second today stocks were starting to look good. It was better than a second, it was more like most of the morning into early afternoon, then the sadness came. Sadness came to TWTR on Tuesday and there was a bit of a let up today.