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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.
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.
Today we have another sleepy day moving into the weekend. As I write this VIX Is up about .18 to 13.15 but probably will not be there for long with the volatility futures hovering just up for the day. As catalysts go, the consumer confidence number hit a 6 year high and that did not do much to push the market into higher territory. My closet theory is the US budget talk is coming again and there has been a solid two year history now of how destabilizing that patter can be. The current back and forth is not what I would call a bullish conversation. The market in 2013 has weathered the payroll tax hike and spending cuts in, well, record fashion. That should make the Keynesians go back to their drawing boards. The
The earnings season has been a mixed bag so far. Mark commented about it on CNBC yesterday morning and the fact that IV is not really taking off. VXX is making year lows today and the IV in the SVXY (Pro Shares Short VIX futures ETF) is making a 52 week low today. Even with VIX cash up the VIX futures compressed a bit. The only thing cheaper than the IV is the realized volatility clocking in a at 7.27 for the SPX. The low volatilities seem to set a table for something higher down the road but we will need a catalyst. The earnings season has not provided one and the muted movement is having an effect on the skew in FB.
What a difference a day makes. The relatively subdued moves yesterday gave way to an explosion after the close when the market decided Big Ben has some teeth left after all. I will call it his reiteration of a reiteration of Fed policy. The market liked the way he spoke live as opposed to the dour old minutes they released. Either way the market loved it. Did the volatility love it?
I guess the little snapshot on the blog says it all. For the last two years the market has been at the mercy of the next Fed announcement. “Are they going to save us again?” Like the big spider in the picture all market players are under the dominion of the FED. At the same time I am going to give credit to Big Ben because this is the first non-action after a Fed meeting release we have seen in quite some time. He might have pulled this off. The market is getting use to the idea of higher rates, maybe, in the future and the end of support by extended bond buying is now in range.
Alcoa has the record today for adding the most market cap to broad market equity prices following just a ho hum earnings report. With a shortage of news and not much happy going on in Europe the only thing to make the market rally was good old AA. Did anyone notice the VIX got to near 14% today? We have to go all the way back to the pre-ending QE days to see a VIX around 14.35. My guess is if it breaks 14 stocks will have shaken the QE blues away. Stocks if anything this year have been a poster child for resiliency. A possible monkey wrench might be the rally in oil.
The Fed will release some information by Wednesday that most likely will tell us that they are going to stay the course which isbuying bonds for now with an eye toward easing in the future that is now approaching faster than the last time they commented on it. The market has picked up all the losses from last week on what I cannot quite figure. Maybe for the USA a Fed taper is good since that means the economy can roll on its own. I agree with that but the markets keep selling off every time there is a whiff of that. Let’s see if there is something in bond volatility that can help us.
As a young floor trader back in the old paper days there was always a need to put the trades on the “tape”. As in “the customer needs to see a print.” Hard to believe that it was such a big deal but at that time electronic execution was in its infancy. Back then traders did not want to be “on the wheel” because markets were updated by open outcry and the automated update systems were still having the kinks worked out. A print now takes on a whole new meaning. We can print things in 3D and the days of worrying about a trade hitting the tape on time are long since passed.
After the “Goldilocks” NFP report on Friday the equity market held up pretty well considering the rip we had on Friday. In what is getting familiar Japan was up, Europe stable and the surprise news is that S&P changed their rating on the US debt nearly 2 years after the downgrade. This will Congress another reason not to do anything but at least for the time being the mix of tax hikes and spending cuts is keeping the market moving in the right direction. The trend for the year has been weak commodities so has the decline in the metals started to slow?