Remember that Lehman week? What happened to volatility and the market? Similarities to 2008 and Lehman Brothers? Yes.

thetrader's picture




The equity market has been trading in  a rather peculiar mood, still dominated by news primarily out of Greece. Other risk measures on the other hand have shown escalating concerns of risk. Credit and volatiliy are currently implying something different to the equities market. Let’s see who will get the upper hand. Meanwhile some observations from last Friday’s action.

On Friday the SPX was unchanged at the lows over the course of five hours, yet TVIX spiked 15.5% in that period, a huge intraday deviation from the
normal negative correlation. Last week we saw app 22%  jump in the VIX, while the SPX remained flat. The week of September 15, 2008, when Lehman
filed for bankruptcy the Vix gained app 22% in a week (close to close, although it traded much higher intra week)) and the S&P was practically flat. Is something about to happen?  Observations with charts below;

 SPX past Friday. Market was trading pretty much unchanged (after the initial drop).

Meanwhile the TVIX (ultrashort VIX) gained some 15%. This is rather odd behaviour given the SPX “non move”.

SPX last week, practically flat.

But the VIX gained 22%.

The week Lehman went bust, SPX was actually pretty much flat.

During that week the VIX gained 22%…

(Charts Infront)

As we have argued, (credit) and vol are both implying a somewhat less “risk on” mood than the equity market currently implies. Maybe, after all, it is time to load up on some shorts via leveraged ETF's?


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Wed, 02/15/2012 - 16:00 | 2163134 virgilcaine
virgilcaine's picture

Back to 2008 and to the mid 1970's after that. The entire bull mkt was built on debt...back to the disco era.

Wed, 02/15/2012 - 15:50 | 2163083 toadold
toadold's picture

I think charts are useful, but I have to keep reminding myself that the map is not the actual territory.  Why I was looking at the pattern of fluctuation in Gold pricing and I swear it was a pattern of A selling to B then B selling to A just to keep the price withing a bracket....damn aluminfoil hats just don't last as long as they used to I guess. 

Wed, 02/15/2012 - 15:54 | 2163057 Village Smithy
Village Smithy's picture

So many divergences, yet so much free money sloshing around, and it would seem, official blessing to market and data manipulation. The only thing that I am sure of is that we are in un-"charted" waters.

Wed, 02/15/2012 - 15:26 | 2162971 AmazingLarry
AmazingLarry's picture

[quote]Meanwhile the TVIX (ultrashort VIX) gained some 15%.[/quote]

TVIX is 2x long, not ultrashort. 

UVXY if you want more leverage.


Wed, 02/15/2012 - 14:54 | 2162827 q99x2
q99x2's picture

Got into TVIX under $14. Little late dude. I expect it to go under $10 after the formal QE announcement. With an upcoming Lehman there's no certainty you'll be able to get money out. Better hope it doesn't happen.

Thu, 03/22/2012 - 15:32 | 2281469 PersonalRespons...
PersonalResponsibility's picture

Basically hit 10 today 3/22.  Good call.

Wed, 02/15/2012 - 13:55 | 2162561 Thought Processor
Thought Processor's picture

The calm before the storm?  

If apple prints a blow off candle in here then that would certainly be a decent turn marker.   Wait and see.

Regardless Europe will need to be brought to its knees just as the US was.   Must level the playing field.  Central banks need to increase their leverage manyfold before the reset button is pushed (ie: playing the war card w/ Iran).

Can you hear those drums in the distance?   

Still some time left though.


Wed, 02/15/2012 - 13:40 | 2162485 vote_libertaria...
vote_libertarian_party's picture

So what you are saying hate America???

Wed, 02/15/2012 - 13:42 | 2162497 true brain
true brain's picture

No all he is saying is that Americans are stupid. Since charts don't matter anymore ever since the slightest rumors move the market. bull...bulls....bullsssss.

Wed, 02/15/2012 - 13:25 | 2162414 Everybodys All ...
Everybodys All American's picture

blow off tops... island formations... are in the works. The only difference now though is we have a PPT that has their handprints all over this market. Will they leave the room unattended for two minutes?

Which is a safer bet AAPL or the 10 yr US Treasury? Never thought in my lifetime you would ever compare the two.

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