Normally I don’t put much stock in 200 day MA but for the first day in a while things seemed to have to settled down. VIX cash darn near broke through 16% before any earnings of consequence came out. ATM volatility is down to below 13% in the Oct serial cycle. Last week it was 18%. The term structure for the VIX futures is back into a normal contango and the volatility productslost their daily gain status.
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I seem to remember this time last Wednesday when the SPX was trading just below 1900. Chinese markets were closed for a holiday week and the weak jobs number on Friday created the whipsaw we had for the last week and a 100 point rally in the SPX. Like we saw twice already since the late August debacle, the rallies were as vicious as the selloffs.
The morning looked solid today as stock ran on GOOG, FB and AAPL rallies. Financials look good as BAC is finally getting out from the constant deluge of fines from the financial crisis. All was going just fine until reports of unrest in Greece started rumbling through the markets. Treasuries spiked even into Yellen's hawkish rate tones. Something happened and it had nothing to do with the USA.
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.