• GoldCore
    07/23/2014 - 07:21
    Ukraine, Gaza, Iran, Isis, Syria and Turkey are all just pawns in a grotesque geopolitical game. All sides have their narratives. But in all cases, innocents must die ...

CBOE

Tyler Durden's picture

Is It Time To Sell The "Old Guy At A Club" Market?





It’s time to think like a contrarian. Why? Because capital markets seem as bulletproof as one of those up-armored military personnel carriers you see in war zones. So what could really rattle stock, bond and commodity markets over the next 3-6 months? The go-to answer, steeped in history, is geopolitical crisis, where the logical hedges are precious metals, volatility plays, and possibly crude oil. Look deeper, however, and other answers emerge.

 
Tyler Durden's picture

Top 5 Surprises For 2014





The last six months have not run according to anyone’s plan.  Who would have thought that equity market structure would yield a best-selling book, after all?  As ConvergEx's Nick Colas notes, on the fundamental side of things, interest rates across the developed world are lower, not higher – counter to the consensus view just 180 days ago. Mutual fund investors first bought U.S. equities earlier in the year, then in the last 6 weeks have begun to liquidate in earnest. Exchange Traded Fund investors are buying more fixed income products than those dedicated to U.S. stocks. Large cap stocks are trouncing small caps in terms of performance. And as for volatility – well, Elvis has clearly left the building on that one. So which of these surprises has staying power into the back half of 2014?

 
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"Old" VIX Plunges To Record Low





Before there was VIX, there was VXO (or "old" VIX) based on OEX calls and puts and trading all the way back to 1985. Because it covers the 1987 crash period, traders often use it as a more consistent gauge. While attention is focused on VIX being 'near' record lows; VXO has just broken below the crucial 9% level that has only been breached once before and has hit a record low. As Citi warns, this suggests that we are very close to if not at the cycle low (for volatility) - though as we noted yesterday, it is unclear if this is a 'good' low (melt-up in stocks) or 'bad' low (crash).

 
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Is The Market Consolidating Or Topping?





"Good" economic news and "stronger than expected" earnings reports have apparently buoyed the market against the drain of liquidity from the Federal Reserve. Today, the market ripped higher at the open as hopes of a "QE" program from the ECB rippled through the markets. Despite commentary from the mainstream media that the markets are doing great, the updated chart below shows the markets continuing its tug-o-war between support and resistance. This is an important point to remember. While it is certainly possible that the markets could ratchet higher from here due to the "psychological momentum" that currently exists, the likelihood of a runaway bull market from here is remote.

 
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Stocks Avoid Sinko De Mayo With Ye Olde JPY Dump-And-Pump





Thanks to the miracle of VIX slamming, USDJPY-stop-running, CBOE breaking, US equity market opening, "we're not worried about no stinking Ukraine civil war or Chinese economic collapse", low volume levitation, stocks knee-jerked off early dumping lows to recover comfortably into the green today. Not everything was exuberant though (as Trannies and the Russell 2000 ended red - bouncing once again off its 200DMA). Gold gained almost 1% today (back over $1310) for its best 2-days since January. The USD closed unch (with notable weakness in SEK). USDJPY ranged down below 102 and rammed stops to lead the charge higher in stocks (even with Japan closed for 2 days). Stocks tracked JPY but benefitted from a dead-cat-bounce in Treasury yields. VIX closed higher on the day (unable to regain the late-slam from Friday). AAPL regains $600 and Biotechs bounced 4.5% - so everything's fixed.

 
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And CBOE Breaks (Thanks To HFT & Google)...





Whocoulda seen that coming? A market that rips 1% low to high at the open as VIX's late-day collapse on Friday is smashed higher and then ripper lower results in... CBOE breaking!!

*CBOE SAYS SOME COMPLEX RATIO ORDERS MAY NOT EXECUTE (only HFT uses complex orders)
*CBOE: DUE TO C2 ISSUE, GOLG8 (Google Options) CURRENTLY UNAVAILABLE FOR TRADING

Welcome to the unrigged markets...

 
Tyler Durden's picture

Meanwhile At The CBOE





... The HFTs are providing so much liquidity they are literally making it rain.

 
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Frontrunning: April 9





  • Top Medicare Doctor Paid $21 Million in 2012, Data Shows (BBG)
  • Separatists build barricades in east Ukraine, Kiev warns of force (Reuters)
  • Greece launches sale of five-year bond (FT)
  • High-Frequency Trader Malyshev Mulls Accepting Outside Investors (BBG)
  • U.S. defense chief gets earful as China visit exposes tensions (Reuters)
  • GM Workers Who Built Defective Cars Fret About Recall (BBG)
  • Kerry, Congress Agree: Superpower Status Not What It Was (BBG)
  • Crimeans Homeless in Ukraine Seek Solace in Kiev Asylums (BBG)
  • JPMorgan's Dimon says U.S. banks healthy, Europe lagging (Reuters)
 
Tyler Durden's picture

The Top 10 Surprises Of The First Quarter





U.S. stocks are like a duck, floating on a quiet pond – calm above the surface, but lots of furious churning invisible to the naked eye.  The S&P 500 looks like it will end the first quarter within a hair of the 1848 level where it started the year, but that doesn’t mean everything else is all stasis and light.  Today we offer up a quick ‘Top 10’ list of surprises from the last 90 days.  Gold, for example, is back from the grave, up 7.3%.  So is an imperial Russia, with the biggest land grab since the building of the Berlin Wall.  Mutual fund flows are ahead of exchange traded funds by a factor of 5:1.  And most of those ETF inflows are into bond funds, not the “Great Rotation” we all expected into stocks.  The 10-year U.S. Treasury yields all of 2.67%, and bonds have bested U.S. stocks consistently in 2014.  First quarter 2014 may not have been a long trip, but it certainly has been strange.

 
Tyler Durden's picture

Consider This...





Today's modest bounce in stocks - considerably removed after-hours - does not provide much hope for those looking to buy the dip with the Dow still down over 1000 points year-to-date. In fact, as we discuss below, troubling news just continues to pour in from all over the world... For those that are not interested in the technical details, what all of this means is that global financial markets are starting to become extremely unstable. Consider the following...

 

 

 
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Pre-Central Planning Flashback: These Are The Five Old Normal Market Bottom Indicators





The biggest fear the market currently has is not the ongoing crisis in the Emerging Markets, not the suddenly slowing economy, not even China's credit bubble popping: it is that Bernanke's successor may have suddenly reverted to the "Old Normal" - a regime in which the Fed is not there to provide the training wheels should the S&P suffer a 5%, 10% or 20% (or more) drop. Whether such fears are warranted will be tested as soon as there is indeed a bear market plunge in stocks - the first in nearly three years (incidentally the topic of the Fed's lack of vacalty was covered in a recent Reuters article). So, assuming that indeed the most dramatic change in market dynamics in the past five years has taken place, how does one trade this new world which is so unfamiliar to so many of today's "younger" (and forgotten by many of the older) traders? And, more importantly, how does one look for the signs of a bottom: an Old Normal bottom that is. Courtesy of Convergex' Nicholas Colas, here is a reminder of what to look forward to, for those who are so inclined, to time the next market inflection point.

 
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Bank Of America Warns: "Too Few Bears Out There", "Investors Not Prepared" For Selloff





There is one main reason why complacency is bad: selloffs. Because as Bank of America explains, in an environment in which there are "too few bears", and where investors are "not prepared for a downside correction", when you do finally get a sell off for whatever reason, with nobody hedged and otherwise prepared for such an outcome, the only logical continuation is piling on until one gets selling exhaustion. And in a world in which hedge fund leverage is about 500%, by the time exhaustion comes, there will be very few left standing.

 
Tyler Durden's picture

It's Quiet Out There... Too Quiet





What are you afraid of, exactly? ConvergEx's Nick Colas notes we all have our phobias and fears, some logical and anchored in reality and others irrational but still powerful; but for the capital markets currently it seems there is no fear. The CBOE VIX Index started the year at 14.2 and has fallen to a close of 12.9 today. That move, Colas adds, has dragged the IVs of everything from U.S. large cap energy stocks to gold to corporate bonds lower in its wake.  Even expectations for Emerging Markets equity volatility are in retreat as we start 2014. But, when near term historical or implied volatility becomes this complacent, it seems appropriate to spend a little more time pondering what might go wrong.  Markets, after all, have the entire “What should go right” side of the trade well understood and reflected in current prices. In that spirit, here is the "Top 10" list of what might take us off the rails of complacency in 2014.

 
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Bonds' Best Day In 8 Months As Stocks Close At Record Highs





Treasury curve flattening continues to gather pace as 30Y bonds rallied their most in 8 months today (even as the shorter-end sold off modestly) but on the week the flattening is dramatic to say the least. Of course, all eyes were on stocks as the Dow and S&P leaked (post European close) to new highs (and the Russell gained back yesterday's losses and some to close the week's winner +3.5%). Gold (and silver) rallied on the day back over $1200 (but closes -3% on the week). VIX followed a similar pattern to yesterday with an early drop followed by a drift higher as it's clear managers are protecting into year-end. Quad witching and rebalancing provided some fireworks into the close as volume rose and stocks slid (as Nanex noted - something broke - lots of micro-crashes/rallies) as CBOE quotes stopped with 10 minutes to go.

 
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Did Twitter Break The Options Market? BATS Declares Self-Help Against CBOE





UPDATE: 23 minutes later - Self-Help is revoked...

Well that didn't take long...

  • *BATS OPTIONS DECLARES SELF-HELP AGAINST CBOE
  • *CBOE: CT BC85 HAS BEEN SWITCHED TO ITS BACK-UP

But, as CNBC previously noted, we are getting used to these "broken markets" by now so it doesn't matter...

 
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