Volatility Curve Snaps Back To April 2010 Levels On Rumors Of Goldman Offloading Spot Vol

Tyler Durden's picture

As of right now, the spot VIX has dropped to
16.80, the lowest it has been since April 20: rumor is that Goldman is
dumping all its legacy OTR long vol positions in a year end clearance
event. Ironically, as the VIX term structure chart shows, this is
virtually identical to the shape of the VIX curve last seen in the third week of April,
just days before the prior year end high was hit and followed by a
substantial snapback. Then again, in a market in which the TICK reading has been
negative virtually all day and stocks are higher, there is no point in
even attempting to predict what may happen. It appears the POMO market
makers are celebrating the Chairman's birthday and bypassing the bond
market entirely, going straight into stocks: after all what better
present for the world's biggest Central Planner than some serious wealth
effect creation... for 10% of the US population. Incidentally, the real
POMO, that of $8 billion in 7 year-ish bonds will conclude in 5 minutes.

Note the VIX curve as of April 15, 2010... and compare to today.

...And here is what happened to the just a few days after - highlighted in red:

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TWORIVER's picture

Watching VXX (38.10) for a close above 38.5 for a reversal. Volume is pathetic today. PM bulls have the ball in their court. Will be an interesting finish as volume comes in a t some point today. Good luck to all.



whatsinaname's picture

10 percent of population or 1 percent TD?

am guessing the remaining 9 percent have also bailed out by now..

SheepDog-One's picture

Talking about what stocks will do is pretty crazy these days, considering 30 straight weeks of equity outflows confirming the markets are empty, churned higher by some robot.

Biggus Dickus Jr.'s picture

Weren't those outflows matched by etf inflows? I thought even td mentioned it.

Cdad's picture

VXX would indicate that the VIX snap back is at hand as it has diverged.  However, and since the VXX creation units machine can be turned on at any moment, suddenly supplying the market with endless shares to sell where moments prior no sellers existed, it is hard to know...to know...if the VIX actually exists or not...or if I have missed my alarm and am still sleeping.

In either event, nothing that another naked short selling attack could not fix for an hour or a day or a year.  After all, why would a professional money manager buy insurance on his long portfolio when all things are so fundamentally good that our currency continues to collapse...right?

SheepDog-One's picture

I dont know how 'volatile' robots are in a dead empty market, I guess it depends on their chip maker and programming.

LeBalance's picture

"Do HFT Androids dream Electric Vicks? Or is it all vaporub?"

I Am The Unknown Comic's picture

+1 Cdad.  Look for continued shorting of the VXX.  Net effect is to help prop market up.     

Cdad's picture

I would not be so quick to ASSUME that more VXX shorting will happen.  As of now, the VXX creation units machine is obviously experiencing a malfunction or has come unplugged. 

But I understand that the criminal syndicate known as Wall Street is in meetings with M. Shapiro of the SEC, helping her to understand which SEC laws should be enforced, and which should be disregarded to better facilitate the arbitraging of every single thing on the surface of our planet.  So maybe M. Shapiro will plug the VXX creation units machine back in and all will be right with the criminal syndicate known as Wall Street later this afternoon.

Right now, however, the syndicate has painted a ridiculously false green market move in Europe in which no one could truly believe, plus the unbelievably stupid bank rally of last week appears in jeopardy already thanks to BAC [which is actually a blight on the entire world now].  Also, the longest term US paper debt just caught a bid, which could be a problem for the S&P...since that should NOT have happened today.

If they don't get that VXX creation units machine plugged back in really quickly now...something will happen that, to tell you the truth, I cannot predict.  However, shorting $9 burritos still seems to be working.

Anyway...you did not answer my question which was...am I awake?



StychoKiller's picture

Being awake in a nation of zombies...how sane is that?

unwashedmass's picture


$8 billion for forty Dow points! Excellent deal for the schmuck peasants, Ben!!!

I'm sure they are feeling "wealthier"....

SheepDog-One's picture

Man thats one fugly dollar chart.

Biggus Dickus Jr.'s picture

This is bullish. Risk on bitchez. I can't stand it any longer and closed my silver short.

Bring the Gold's picture

You were short silver? LOL! Good decision to close that out.

I Am The Unknown Comic's picture

I'm waiting for another attempt at busting through $30 for sliver before taking profits.  Hopefully in the next couple of days.  Today, it will probably be beaten back going into PM close at 1:30 EST. 

MrTrader's picture

Uncle Ben has supported his Madoff sheeples as good as he can. Nice Christmas present, Ben. Why don´t you tell it openly that you are supporting your crony "establishment buddies". At least, I would not have to listen to your hypocritical bullsh1t on 60 minutes, right ?!

plocequ1's picture

Why is the VXX and bonds even mentioned anymore. It dosent really matter does it? The new markets equation is what follows. Taxpayer money+ POMO= Higher stock prices & Bonuses. Everything else in between is nothing but bullshit tripe that my great grandfather used to  talk about after watching William F Buckley on PBS way back in the 80s

MrTrader's picture

VIX,VXX,P/E,interest rate yields, USD, Gold = meaningless.

Oh regional Indian's picture

Wow! The Hedge is crawling today.

Unnyways, VIX at lowest point in one of the most extreme times in human history in terms of socio-fisco-econo-&^$%# times is a joke.
It's the modern equivalent of the shoeshine boy.

I say, JUMP!



Hooligan's picture

The reason for the sell off in April was a direct correlation to BPs oil leak.

Oil services got hammered, and took the market with it.

We are in a bull market until it ends, and trying to front run it short is a fools game.

Crispy's picture

Only this time PMs are chasing returns into years end.


Wake me at cash 15.5

TexDenim's picture

Yeah, maybe Armegeddon is going to be this week. Santa Claus will be delivering coal this year.

wiskeyrunner's picture

The U.S. stock indexes are so overbought, even the monthly timeframe is pegged. But as we all know they won't let it drop for a second. Got to make sure Wall Street gets another round of record bonuses. As for the rest of us expect $18.00 a week in tax breaks.

Cdad's picture

Now see, that is exactly what I was talking about in an earlier thread.  The VXX creation units machine really needed to be plugged back in right along with the announcement that GS was selling SPOT Vix.  Now, the whole "futures" thing with the VXX is going to be bothersome to folk that actually know there is reason to be concerned, at least, about how things in America are going just now.

So the risk now, of course, because the criminal syndicate known as Wall Street may have one of those poor execution moments when the VXX goes into an insane parabolic move because the syndicate was not able to create units and, instead, has to go ahead and buy them just in case the FBI should come through the door at some point during the week.  Makes a guy want to go long FBI and short Shaprio.  But since that is hard to do, a guy might actually consider going long VXX and short $9 burritos.  I'm just thinking out loud here.

Consequently, and since I am virtually a sadist on the CNBC front, it is almost amazing to me when Ken Lanngone speaks publicly and his words are not met with either FBI handcuffs...or at least shouts of "Off with his head!"  I cannot help it.  I cannot turn it off.  It is like watching a train speeding towards a gasoline tanker straddling the track stalled.  I am sorry.

And is if on cue, Ken just said, "Never sell the American citizens short," which is clearly something he has done in his life at least a 1000 times.  LOL!

The criminal syndicate known as Wall Street must first be purged [i.e. of people like K. Lanngone] before capital can form again with any confidence.  So let's quit printing money in lieu of said capital formation, punish those that have arbitraged our economy to death, and move on with our healing.  Ok?


Altan311's picture

So wait, let me make sure I'm seeing htis right. Goldman selling vol rumor = Goldman buying vol according to my bizarro meter?


Cdad's picture

No, no, no...you are forgetting to calculate the effect of the creation units machine on near term supply demand characteristics of VXX vs VIX vs common sense...and how Goldman is doing God's work arbitraging the crap out of every living or dead thing on the surface of the entire planet in the intervals between when the FBI is visiting their offices and when the FBI is not visiting...while negotiations with Mary Shapiro are ongoing...with counterfit dollars printed at The Bernank.

Com'mon man, get it together. 

Was I not clear...or is it the case I missed my alarm and am still sleeping?  I would really like to know the answer to that question.

I Am The Unknown Comic's picture

Cdad you are wider awake than I am.  I knew this farce was in place put you've got me thinking deeper and realizing the repurcussions of it.   I almost wish I could go back to sleep....but too late now, the cat's out of the bag.

I know we touched VXX 38.50 today but I am really going to be suprised if we close above it.  A VXX reversal would shatter Bearshank's wealth effect scheme. 

Cdad's picture

Well....I did have an instance of blowing coffee out of my nose per some comments that K. Langone made on CNBC...which did cause me to stir and wake a bit.  However, the surreal nature of everything today has me also wondering if maybe I am awake but traveling in a parallel universe.

That said, it would seem that the VXX creations unit machine has remained turned off today.  This means one of several possible things:

1.  There are FBI agents visiting a major criminal syndicate Wall Street bank and they needed to quiet that machine down.  2.  The VXX creations units machine came unplugged, and no one knew anything about it or even that electricity was required for it to work  3.  The market is close to done on going up and is about to get reacquainted with going down.  4. other things I don't know because I am not a rocket scientist and I have tried to read the whole "ETF creation unit" thing but am still too dumb to understand how infinity shares works. 

But I remain hopeful that the rule of law will eventually return, sure that a burrito at $9 is expensive as all get out, confident that when a stock's PE goes over 250 it is priced for stupd, and wishful that I'll have enough ammunition stored up to fight off the Apple zombies once they realize how much they are craving human flesh. 

Good luck out there...

I Am The Unknown Comic's picture

OK I'm sufficiently suprised at the 38.69 close.  Does this mean we have a reversal?  Lets see confirmation tomorrow. 

And good luck to you too.  Thanks for the dialogue!  See you tomorrow!

Cdad's picture

Surprised?  You shouldn't be.  First, I alerted you to the problem with the VXX creation units machine quite early in the day.  Second, Robo Trader is now posting charts on these various things which I have been discussing with you...now, of course, that they have already happened.

Robo has a great record posting the importance of things after they happen, and he is even better and changing the meaning of things by altering the time frame over which they have or have not occurred.

Neither Robo or I can tell you, however, what is going to happen tomorrow.  I'll tell you this though...if shares of VXX don't show up in massive volume EXACTLY where you WOULD NOT expect them to show up, indicating that the VXX creation units machine has been plugged back in, well then I think this market is in deep crap trouble. 

'Cause I think oil has done as much GOOD as it can do, and the banks have probably fake-rallied as much as they can rally [considering that most of them are insolvent], and retailers literally make me LOL when I look at those charts and even more so when I check those PEs...LOLOLOLOLOLOLOL!

And of course, and most importantly of all, probably, I think we have reached the point when the spot price of gold can NO LONGER BE the S&Ps bff. 

But I got to tell you, Uknown...I am not a rocket scientist...so take everything I say with a grain of salt...because past performance is not a promise of future returns, you know?

Hi ho.  Cdad was here....

tniutnia's picture

Someone found the cord for the machine...

shortvols's picture

i trade the vix futures extensively and i have witnessed the back months dropping like a rock all together. could be goldman, but i think it is simply the futures just moving to a more normal curve structure inline with historical pricing in relation to spot vix. there is no edge in what happened except for the fact we are very due for some increased vols by year end.