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Is The S&P Set To Test 1370 (Or 1150)?

Tyler Durden's picture


We noted the VIX divergence (and most importantly the 14-month flatness of the term-structure - which is following the 'debt ceiling' path perfectly!) yesterday and pointed out how illiquid markets were. Critically, those that could were selling into strength and those that couldn't (due to size and illiquidity) bought protection. Overnight the flash crash recoupled S&P to VIX but this morning has seen more protecction buyers step in, driving VIX towards 20% (5 month highs). Given the recent correlations (and managers knowing full well they can't unwind their exposure into the cash market as the avalanche will be too large), VIX implies the S&P at around 1370. Interestingly, this level of S&P is also approximately what a 2% rally in the USD would imply (the FX implication we suggested yesterday of a failed cliff resolution in the short-term).

VIX is implying 1370 for the S&P


A 2% rise in USD implies around 1370 for the S&P



Meanwhile, the VIX term structure is behaving EXACTLY as it did last year during the debt ceiling debate!!! The higher the chart, the higher short-term protection is priced relative to medium-term (and if greater than 1, implies short-term VIX is above longer-term VIX - which we just broke today)...


Short-term protection costs are set to soar if we follow last year's path... aren't these analogs just becoming crazy? The S&P 500 lines up far too well...



Charts: Bloomberg


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Fri, 12/21/2012 - 11:23 | Link to Comment Badabing
Badabing's picture

I said it once and ill say it again.

Intercontinental Exchange Finally Wins NYSE Euronext For $8.2 Billion

A way to lower costs and competition, can you say monopoly?

With an office in Atlanta and based in London the ICE owned by nun other than the infamous Rothschild’s will take control of $OPM$ invested in the NYSE. Say good buy to your 401k that money can now be re-hypothedecated to infinity in the UK. The laws don’t apply to a one shot hypothedecation deal in the USA.

  If I where you, and YOU know who YOU are, I would get out and buy something that will hold its value.

So now it all makes sense, TPTB don’t want you to have a exit. Ergo the PM smashes.

Fucking Banks!     

Fri, 12/21/2012 - 11:27 | Link to Comment vast-dom
vast-dom's picture

it would have tested and tasted 750 if not for central meddling.

Fri, 12/21/2012 - 11:33 | Link to Comment saints51
saints51's picture

agreed. Probably still hanging around there waiting to drop again.

Fri, 12/21/2012 - 12:21 | Link to Comment vast-dom
vast-dom's picture







Fri, 12/21/2012 - 12:39 | Link to Comment Spirit Of Truth
Spirit Of Truth's picture

You all are looking in the wrong direction. It appears that the battle for the chemical weapons/SCUD missile site in Safira, Syria is underway.  This is an extremely dangerous situation.  British nationals are being urged to flee Syria any way possible.

Fri, 12/21/2012 - 13:50 | Link to Comment AldousHuxley
AldousHuxley's picture

Last year German empire attempted buyout of NYSE for $9B
US empire (ICE and Nasdaq) countered with $11B to prevent the conquest
Now ICE will buy NYSE for $8B

That's how the game works folks

Fri, 12/21/2012 - 14:14 | Link to Comment q99x2
q99x2's picture

Fucking Banks

Fri, 12/21/2012 - 11:22 | Link to Comment I am a Man I am...
I am a Man I am Forty's picture

wimps buy protection

Fri, 12/21/2012 - 11:23 | Link to Comment mdtrader
mdtrader's picture


Fri, 12/21/2012 - 11:27 | Link to Comment HelluvaEngineer
HelluvaEngineer's picture

Seriously.  This post was out of date before it was posted.  VIX is getting flogged right now.  No one gives a shit about anything anymore.

Fri, 12/21/2012 - 12:37 | Link to Comment Tom_333
Tom_333's picture

Yes.Right.Won´t happen.The ponzicircus will roll on

Fri, 12/21/2012 - 14:41 | Link to Comment stockscooter
stockscooter's picture

Actually, vix is on the precipice of going ballistic.  Watch for news to try and soothe this savage market.

Fri, 12/21/2012 - 11:29 | Link to Comment RopeADope
RopeADope's picture

Need to push equities a lot higher than 1475. Remember, trillions of losses have to be absorbed by the younger generations so old farts do not have to pay for their mistakes.

Fri, 12/21/2012 - 11:25 | Link to Comment Fredo Corleone
Fredo Corleone's picture

It is doubtful the PPT will abide such a precipitous decline. All systems are "GO" for immediate intervention.

Fri, 12/21/2012 - 11:42 | Link to Comment The Joker
The Joker's picture

Intervention?  I know it was you, Ben.  You broke my heart.

Fri, 12/21/2012 - 11:25 | Link to Comment StoleYourMoney
StoleYourMoney's picture

Show me.

Fri, 12/21/2012 - 11:27 | Link to Comment buzzsaw99
buzzsaw99's picture

not with the bernaked at the switch

Fri, 12/21/2012 - 12:54 | Link to Comment Salon
Salon's picture


They gotta let it drop a little to get action on the fiscal clif.

Cover at spy 1380 first of january.

If u wont trust an anonymous internet poster who can u trust?

Fri, 12/21/2012 - 11:27 | Link to Comment realtick
realtick's picture

Just go with the black and orange - it's the clearest format

(and Helvetica)

Fri, 12/21/2012 - 11:28 | Link to Comment Dr. Engali
Dr. Engali's picture

Wake me when we get to S&P 400.

Fri, 12/21/2012 - 11:28 | Link to Comment ekm
ekm's picture

Nothing convinces me until I see 1000 dow pts/day for 3 days in row.


That will happen when the next primary dealer collapses. If no primary dealer collapse in sight, no drop, period.

They are in an insect trap, and the only way to get out of the trap is DEAD.

Fri, 12/21/2012 - 11:28 | Link to Comment Cursive
Cursive's picture

Depends on your timeframe.  The market will go up and market will go down, but I feel very confident that the generational lows are in our future.

Fri, 12/21/2012 - 11:34 | Link to Comment Dr. Engali
Dr. Engali's picture

Guaranteed to be much lower than Apple's "generational low".

Fri, 12/21/2012 - 11:29 | Link to Comment tooriskytoinvest
tooriskytoinvest's picture

What A Year 2012 Has Been! 75 Economic Numbers From 2012 That Are Almost Too Crazy To Believe

Fri, 12/21/2012 - 11:35 | Link to Comment SmoothCoolSmoke
SmoothCoolSmoke's picture

It would not suprise me if we finish green today.  No way Buck Fernankie makes the sheeple feel nervous with 3 shopping days left.  No way.

Fri, 12/21/2012 - 11:36 | Link to Comment Tsar Pointless
Tsar Pointless's picture

As long as words speak louder than actions, the S&P won't come near 1150.

But that's how things are here in Amerikkka, where "Style over Substance" isn't just a slogan, it's a way of life.

See this:

Stocks Bounce Off Lows After Boehner Comments
Fri, 12/21/2012 - 11:45 | Link to Comment RopeADope
RopeADope's picture

The US government is close to mandating replacement of your brain with a Twitter account. It's all bullish inside the Matrix...

Fri, 12/21/2012 - 11:38 | Link to Comment adr
adr's picture

If the market mattered I would care. The market going up means more people are losing jobs because layoffs are bullish. Corporations going bankrupt means the market goes up, because they will get leaner and more competitive supposedly.

The market goes up and the price of gas goes up, the price of natural gas goes up, and the price of food goes up.

The market going up means more QE because the recovery must be supported. Building more homes to complement the couple million vacant homes and the soon to be foreclosed millions more, because there is a recovery.

The market can only blow bubbles and has lost all relevance to the daily life of anyone under the top 10%. The market going up can only make life harder for the 90%. At least if the market craters, the 90% might suffer, but the 10% will suffer more. The top 1% will suffer the most.

The headlines of, NY Billionaires wiped out in market crash, or Now broke Zuckerberg forced to wait tables in San Francisco, would be the sweetest words ever printed.

Fri, 12/21/2012 - 11:52 | Link to Comment scatterbrains
scatterbrains's picture

for realz..  you can substitute  a graph of real inflation with a chart of the Russel 2000.  It's a 1:1 correlation more or less. Think of the russel 2000 as a giant strap-on.. the more it rises the deeper inflation penetrates you.

Fri, 12/21/2012 - 11:44 | Link to Comment sbenard
sbenard's picture

Thanks to Bubbles Bernanke, NOTHING can keep a BAD stock market down!

Reality is irrelevant! We have PRINTED prosperity now!

Fri, 12/21/2012 - 11:48 | Link to Comment Calidreaming
Calidreaming's picture

doesnt matter today it will fill the gap up.  it always does.  maket opens way down -melts up.   market opens way up- melts up even more. 

where the fuck is that mayan meteor

Fri, 12/21/2012 - 11:55 | Link to Comment beaker
beaker's picture

So basically this article is saying that the market might go up or it might go down.

Fri, 12/21/2012 - 12:10 | Link to Comment indianajohns04
indianajohns04's picture

Well, Tyler's convincing me to get greedy on my VXX.

Fri, 12/21/2012 - 16:15 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

SPY puts work a lot better.

Tue, 12/25/2012 - 17:49 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

depends. vxx calls have moved well with vxx in the past, vxx has moved -4.6x power ratio to spy, so in theory spy puts can't get nearly as much as vxx calls.

In reality recently vxx and spy have moved TOGETHER which then means vxx calls would not be so hot. HOWEVER, if you split it between vxx calls & spy puts, the higher risk but higher gains for vxx moving so far up if it does, you could do nicely.

And if vxx does indeed go up very high like 75 or 90 then a sure thing at its peak is vxx puts. Pretty much any monkey could do it but you need to wait for it. spy puts work too put look at the distance dropping in linear dollars for vxx puts from a 75 or higher price... vs spy's maximum drop. And there you go.

Fri, 12/21/2012 - 12:54 | Link to Comment LouisDega
LouisDega's picture

Hmmm, Thats a tough one. Let me consult my financial advisor. Hello Robo?

Fri, 12/21/2012 - 13:21 | Link to Comment Boilermaker
Boilermaker's picture

Another OMFG, the market is going to crash post based on a premise that the 'market' is actually a market and can crash.  Somehow dismissing the other 50% of the posts that clearly show the 'market' is being jammed higher or supported by the FED.

This never gets old, I guess.

Fri, 12/21/2012 - 15:54 | Link to Comment Bizaro World
Bizaro World's picture

Exactly.....I'll believe a market crash when I see it, until then, the shenanigans continue.  Party on Wayne, Party on Garth.....I'm on the sidelines except for PMs.



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