Stocks are staring at the 2200 SPX level and blinking. Since there is no real impetus to drive things higher buyers are content to sit where they are and wait. For some reason the Yellen at Jackson Hole speech is starting to take on meaning. With a market lacking meaning anything is a reason to move us. Gold and gold related names like the miners are getting hit hardest.
2015 gave us VRX and the corporate perp walk of the year as the CEO got grilled for jacking up the acquired drug prices. Congress gave VRX the smear job and the stock lost 90% at the low earlier this year. My blog of last week talked about VRX and yes it is time to buy juice in there again. That is not my subject. Congress might have a new dog to beat and the name is MYL.
So the Fed turns a bit hawkish and wants to raise rates. There seems to be the opinion that this fall at some point rates will nudge up. That has done nothing to dampen bonds and prices jumped again. Since we are the only G7 country paying interest I guess higher rates make US Gov bonds more attractive? That also says something about volatility.
Stocks are up .85 in SPX and VIX up to 11.66; that’s right up to 11.66. So you ask yourself is it 2006 or 2016? Be that as it may stocks and the market are looking at the second half of 2016 and leaving the front half in the rearview window. Another stock that would like to leave 2016 in the review window is VRX. Today VRX was up 25% to 28.16 and it might just be getting started.
We had another day of near all-time highs with banks again leading the charge higher. I think the IV is getting too cheap but that will be a story for the next blog. I think the interesting story is coming out of Turkey. Is it the real story or the non-story that is taking shape on the coup attempt for a NATO member? The ETF that tracks the Turkish (TUR) market was down around 6% today.
It seems since the August Flash Crash this is the cheapest volatility has gotten since before that time. When I look at a vol chart it seems there is this year and last year. When I look at BAC it is no exception. There was last year’s IV and this year’s IV and now we have very low IV going into earnings. I read this as the market expects little out of this earnings cycle. Except someone forgot to tell the equity markets as they have raced to new highs.
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One of the most disturbing volatility patterns is VIX up, SPY (or SPX) up. Vol should decline into the face of a rising market. If it does not that is traditionally a tell that stocks will sell off at some point in the near future. If I knew when that was I would tell you after I bought a boat load of SPX puts. That date appears to be sometime next week.
Besides the airlines this cycle (AAL down $13 since earnings) AAPL has taken it on the chin with shrinking iPhone and iPad sales. The big one is the iPhone which generates most of AAPL’s dollars. Newsy rumors today that AAPL vendors are expecting much smaller orders cratered AAPL stock. This is after a rough ride from $100 after earnings. For a company that has mostly done everything right since 2000 it is a tough road.