Stocks had a hard time today jumping up to all-time highs. The SPX started the day down and never looked back as the better than expected GDP revisions caused some rate concern. Greece’s PM also started back on the crazy train so that unsettled European markets after they were anxious to get to higher levels. FB is not feeling that right now.
Yet we have another FOMC announcement with the Fed choosing to do nothing. I don’t know how far the economy has to grow before rates start to normalize but we have to be getting close now. We had the 90’s and a government surplus and higher rates and no one was complaining. Once again post-meeting the VIX dropped even with near sure 25 basis point rises in 2015 mapped out.
Seeing news reports on TWTR about AMZN using couriers to deliver packages gave me the UBER kind of feeling. UBER is on its way to becoming one of the highest valued pre-IPO companies on the planet and it makes some sense AMZN is taking a page from its playbook. That got me looking to AMZN volatility and it is very cheap.
I toss that out there of course and I don’t mean VIX. What I do mean is the ATM volatility for the SPX. With the Greece deal on and off again the one thing that has been consistent over the last two days is the total immolation in implied volatility. The 9 handle for SPX ATM IV is a tough barrier to break because it means traders are actively hitting option bids on the downside to drive the ATM lower. We are almost there.
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We have another lackluster session today with no good news coming out of the EU on the Greece subject. For now that is the millstone around the market’s neck with things just dragging. Besides NFLX up, stocks cannot put in any kind of sustained rally. Bonds are getting trashed too in the face of QE out of the European Central Bank.
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Stocks regained from lows today after a near panic selloff in Chinese equities. Prices here are down only fractionally as selling in China and the accompanying volatility is becoming habit as Beijing tries to kill the speculation. On the opposite side of the spectrum is TWTR. Not a lot of speculating there.
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Apparently the Greece deal with the Troika is imminent. That was enough to send VIX lower as it re-finds the 12 handle with the volatility futures hovering and not ready to make any major breaks today. We might rename this Semi-Wednesday as traders bid up all sorts of semiconductor names on the BRCM takeover news. I think there is a simpler trader out there.
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The FOMC released their statement today and the June raise is looking unlikely. 2016 will probably be the year when interest rates get back to normal but for now all stocks could do was muster a .10% move in the big indexes either way. We are starting to tilt toward good news is good news again but the sub normal rates and stocks are showing the indecision today with VIX trading 2015 lows.
Today retraced most of the goldilocks rally in stocks on Friday. 2 days pass and without any real good news (TPP failed in the Senate) stocks had a hard time mustering anything. Early morning bond selling started things off on the wrong foot too. The reality is the fear is just not there as the big elephant is rates and the ECB is content to plod along with bond buying until the Greece issue passes. We only catches glimpse of what will happen when rates start to reset. For now that is just not happening.
Mark made a great observation yesterday on bond IV being relatively low. Today we had the 2% move and he was right. VIX is sitting in an interesting place as we are seeing 1% intraday SPX moves right now on the recent volatility in European bonds. If today was last year, the VIX future would have closed even with the old VIX cash.