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Category: Blog
Signs the Market is Getting Complacent – 8.16.2012
Call buyers are dominating this strange market and I feel that there should be more fear than what is present. The VIX spot price is below 15 points and is trading near a key support level. I remain bullish on the VIX, as I do not think that it is currently pricing in the uncertainty that is present in the market. I will be watching for a rise in the VIX which will imply higher implied volatility on SPX options, hence rising options prices. I am expecting movement in the S&P in the near future as soon as a catlyst is exposed. Whether the catalyst is Euro fears, QE3 or the election, I am looking to buy vol.
As you can see from the chart below, the spread between the VIX and S&P is relatively tight. Based on the chart I think that this spread is about to widen.
David Cornes holds a degree in economics from the University of Montana.
Morning Rage 8.16.2012
The Hang Seng slid its way down to finish -0.5% today led by China Mobile. China Mobile, the second
heaviest weighted stock on the index, dropped 5% with a 0.9% drop in first half EBITDA today, due to
an increase in competition. Internet giant Tencent rose again today jumping 6.4%, putting it to a 57%
gain so far this year. Lenovo, the world’s second largest PC maker, grew 6.3% as quarterly profits beat
expectations.
In Europe, the FTSE 300 is down .2% as the rally weakens, yet again, due to lack of action by the central
bank and also a warning from China that its trade outlook for 2012 was worsening. Trading has been low
as many investors see no reason to commit or take risk in Europe until the central banks give incentive.
UK retail sales were up .3% in July and 2.2% year over year, showing the Olympics to not have had as
much of an impact as expected.
World gold consumption is down 7% in Q2, drug down mostly by India and China, says the world gold
council.
Commodities are currently showing crude down, while natural gas, silver and gold are all ready to trade
positive.
Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market.
Comments can be directed to ryghcw19@uww.edu
S&P Emini & Unusual Options Activity Daily Vid Recap 8.15.2012
Euro (6E) and Oil (CL) Pivot Points for 8.16.2012
S&P Emini Pivot Points for 8.16.2012
Doherty at the Close 8.15.2012
In earnings news, Staples (SPLS) fell -14.53% after they announced that the company will be lowering its full year outlook after weaker than expected quarterly results. Target (TGT) gained 1.74% after the retailer reported better than expected Q2 earnings, raising Q3 and full year projections above analyst estimates. Finally, Abercrombie & Fitch (ANF) jumped 9% to lead the S&P after reporting good quarterly earnings and a 10 million share increase to its buyback program.
Reuters Interview 8.15.2012
Metals Update 8.15.2012
The USD is currently very strong, however that can buckle with hints of QE3, causing an inflow of demand for gold as a tangible currency. Investors flock to gold as the universal reserve currency instead of silver as gold is the benchmark. The metals have been relatively flat this week as they are waiting for the release of the FED minutes due to be released next Wednesday.
Investor’s preference for gold is also evident with the currently weak Platinum/Gold ratio. The spread is trading at under 1. The price action of this pair indicates the relative strength of gold as a reserve currency, considering that platinum is roughly 19 times more rare than gold. Whether platinum is underpriced or gold overpriced, I have been looking at selling gold and buying platinum in anticipation of the pair moving above 1.
Front month gold futures were trading at $1607.30, silver futures were at $27.90 and Platinum was $1397.50 as of this morning.
David Cornes holds a degree in economics from the University of Montana.
VIX Outlook 8.15.2012
The most unique quality about the current VIX term structure is the December 2013 contract. This could be an arbitrage opportunity for calendar spreaders with the assumption that contango resumes.
I like to buy charts like the weekly VIX chart below. There is not much room for the VIX to go down further and I am expecting a sharp pullback to the upside once big news hits the screen.
David Cornes holds a degree in economics from the University of Montana.