The Stock Market

     

 

 

The Sharp Move in the VIX Accelerates

In Monday’s trading session, the upward move in the volatility index VIX (which measures the implied volatility of SPX options) continued unabated, vastly out of proportion with the move in the underlying stock index. “Brexit” fears continue to grow, which has apparently been the driving force behind this move.

 

Una manifestazione a favore di Brexit a LondraThe “Brexiteers” are gaining support as the referendum date draws closer – global financial markets are getting somewhat upset over this.

Photo credit: Neil Hall / Reuters

 

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Believe It Or Not… There Actually Is Some Downside Risk

BALTIMORE – Not much action in the stock market last week. A few little steps ahead to over the 18,000 line for the Dow. Then a few little steps back. Currently  the index sits at 17,732.

 

1-DJIAThe Dow Jones Yawn Average, daily, plus a special message by Auntie Janet to the punters. Soon they may need an extra dose of Prozac too though – click to enlarge.

 

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Do or Die

I think I speak for everyone involved if I say that it’s way past high time for this market to either breach the wall ahead of SPX 2150 or finally accept defeat and relieve itself to the downside. It’s become a war of attrition at this point as we have been suffering through this deadlock of a market for more than a year. And may I say – it’s getting not just boring but increasingly annoying.

 

the_wall_must_fall-1000x593The Wall…

Image credit: Home Box Office (HBO)

 

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Home of the Anti-Bubble

It seems like almost everybody has an opinion about Twitter (TWTR) – both the company and the stock. As for the company it seems that their “window of opportunity” to massively succeed has essentially closed as user growth and revenue have both slowed, quite dramatically, over the past 18 months. Plus management turnover is clicking at a rapid pace. Company executives typically do not leave if the firm’s future seems bright.

 

DorseyJack Dorsey, the ubiquitous

Photo credit: John Sebastian Russo

 

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Dismal Number Bombardment

The May NFP jobs just dropped half an hour ago and the numbers were was so dismal that it left a smoking impact crater across equity futures. Apparently we added 38k jobs which was several standard deviations below the median forecast of 160k.

 

trouble_in_paradiseSomeone just threw a hand grenade M33 into the trench – and as is well known, that grenade can have a strong effect on morale

Photo credit: AP

 

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An Alert for the Global Posse of Liquidity Junkies

In the summer of 2015 and again in December-February this year, global stock markets were rattled by weakness in the yuan’s exchange rate vs. the US dollar. Yuan weakness is widely held to exacerbate pressures on other (already weak) emerging market currencies, but more importantly, it is seen as a symptom of accelerating capital flight from China.

 

1-USD-CNY-ann1USD-CNY, daily (a rising price denotes yuan weakness) – slowly creeping toward Panicville again? Resistance is between 6.60 and 6.65 –  we suspect that if that level is exceeded, all hell could break loose again – click tro enlarge.

 

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Yellen Looms

We’ve got a bit of a double whammy going on today in that it’s the last session before the long weekend plus Yellen is scheduled to speak late in the day. So it’s probably fair to say that few of us are going to be doing much on the trading front and I wouldn’t be surprised if most of you are already on the way out.

 

hitting_the_roadOff we go…

 

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Cold Spells

My favorite quarter of the year is slowly drawing to a close, with Memorial Day in the U.S. marking the beginning of the long awaited vacation season. It’s been a long winter and we haven’t really seen much of a spring over here in the Mediterranean to be honest.

 

spring_landscape-1000x600The spring, as it is supposed to be…

Photo credit: Achim Thomae

 

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Smart Money Fleeing Stocks

DUBLIN – The Dow dropped 180 points on Tuesday – or about 1%. And another clever billionaire says he is looking elsewhere for profits. Reuters:

 

“Activist investor Carl Icahn on Monday said there was a chance the stock market could suffer a big decline, saying valuations are rich and earnings at many companies are fueled more by low borrowing costs than management’s efforts to boost results.

“I am very cautious on equities today. This market could easily have a big drop,” Icahn said.”

 

Icahn-2Famous activist investor Carl Icahn – in fact, we like to think of him as the “original activist”; we still remember when he had his way with the likes of TWA and Texaco back in the 1980s. Evidently, tempus fugit. Does he know something we don’t? It certainly seems possible. After all, contrary to us, he has made billions. According to his latest filings, he currently holds a huge net short position of 150%.

Photo credit: Platon for Time

 

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Not Easy, But There Remains Potential

As equities continue to gyrate over respective medium term support levels I do not feel particularly tempted to get sucked into placing any haphazard directional plays.

 

king of blingThe King of Bling

Photo via picsofcelebrities.com

 

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Another Vega Crush Target

Macy’s (M) may not be anyone’s favorite place to shop these days, but its volatility curve is set up nicely for a vega crush campaign.  We’re going to look at two different ways to take advantage of M’s volatility term structure ahead of earnings (tomorrow morning before open).

 

macys1900-1000x740Macy’s store of yore

Image via Frank Leslie’s Illustrated Newspaper

 

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Operation Vega Crush Part II – Post Mortem

Before we get to the specifics of last week’s option campaigns, I wanted to cover a few interesting observations we made from our strategies this past week. In an effort to show how little risk is associated with these types of vega strategies, I actually believe we were too conservative this past week. While we made money on both campaigns we could have certainly done better had we decided to be just a bit more aggressive.

 

2016-05-09_debrief-1000x679Debriefing time

Photo via harringtonmuseum.org.uk

 

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