A client of ours sent me a stat that said, “Only 2 down days in last 14 for SPX leading into the official end of q/e........un-freakin -real!” I have to share that sentiment. While I have not been betting the market is going to go down I been thinking it would not go up this fast.
I gave up a long time ago trying to figure out why the market does what it does but at this point my guess is ….relief. The equity market is possibly quite happy that the Fed will start to exit. I guess we will see tomorrow. Either way it is a big rally on lots of unknowns.
One of the really fun parts about this Fed juiced market as we approach an announcement is that all the traders sit around and do nothing since we have to wait for what the Board of Governors comes out with. I can remember trading for a decade and a half and what the Fed was doing was at the bottom of the list. There was too much growth to contend with. We will know when things improve when each Fed minutes release take on less meaning. The underwhelming VIX over the last couple of days signals we might be moving that way. However, It does look like we are getting a signal in MSFT.
Back in the old days before the 3rd QE and Mario Draghi promised to support the Euro the SPX was trading 1329 and the market had one star, AAPL. Today feels like old is new again with AAPL lovers back after a not awful earnings report and pretty much everything else down. Gold, bonds, oil and stocks in general all are taking a breather from the recent run and the lack of great news locally gave investors pause. The strange thing is that Europe actually rallied today on a pickup in demand. For whatever reason AAPL was again the star and the post earnings volatility acted like it.
Today’s market activity feels a lot like the day before and the day before and so on. Without a resolution it is going to be tough for the market to get a breeze. Besides AAPL moving around intraday things are really stuck in the mud. Whatever I end up doing has to get past the current sideways slosh about that passes for market activity these days. At this point I am interested in adding some longs to my portfolio but what to buy and where?
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 looks like we are waiting for Friday morning for any meaningful drop in volatility (or another pop), but right now, there is enough movement to support what is going on.&nb