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Credit Suisse "Fear Barometer" Hits All Time High
As we noted moments ago, the "old" VIX just hit record lows (and with the "new" one is just shy of single digits, it is hardly an indicator of imminent panic). Surely complacency rules, sentiment which is confirmed by looking at such indicators as intraday trading ranges and (even more) evaporating volumes, not to mention a Fed which explicitly is now involved in market "valuation" exercises following Yellen's statement that the market appears fairly valued (she will surely advise when it is no longer fairly valued).
So is it smooth sailing ahead, with the market firmly under the control of the Fed?
For one possible answer we refer to the latest note by FBN's JC O'Hara who looks at a different "fear" index, namely the Credit Suisse Fear Barometer. He finds that, at 37%, it has never been higher.
For a succinct explanation of what this far less popular indicator captures we use a handy definition by SentimentTrader:
EXPLANATION:
The CSFB is an indicator specifically designed to measure investor sentiment, and the number represented by the index prices zero-premium collars that expire in three months.
The collar is implemented by the selling of a three-month, 10 percent out-of-the-money SPX call option and using the proceeds to buy a three-month out-of-the-money SPX put option. The premium on both sides will be equal, resulting in a term commonly known as a zero cost collar.
The CSFB level represents how far out-of-the-money that SPX put option is, or in insurance terms it represents the deductible one would have to pay before the put kicks in.
So, for example, if the CSFB is at 20, then that means an investor would have to go 20% out of the money to be able to buy a put with the proceeds from selling a call that's only 10% out of the money. That means there is more demand for put protection - a sign of fear in the marketplace.
The index would rise when there is excess investor demand for portfolio insurance or lack of demand for call options.
It differs from the Chicago Board Options Exchange Volatility Index or VIX. The VIX, calculated from S&P 500 option prices, measures the market's expectation of future volatility over the next 30-day period and often moves inversely to the S&P benchmark.
The VIX is a fear gauge by interpretation, not by definition. It was designed to quantify the expectations for market volatility -- a property that is associated with, but not always correlated to fear.
GUIDELINES:
The Fear Barometer doesn't work as most of us expect it to. It doesn't necessarily rise as the market drops, or fall as the market rises. In fact, often it's the exact opposite.
The reason is because traders in S&P 500 index options are mostly institutional, so the options activity is often a hedge against underlying portfolios. So when stocks rise, we often see more demand for put protection, not less.
It turns out that these traders can be pretty savvy short-term market timers. So when we see a sharp upward spike in the Fear Barometer, it means that traders are quickly bidding up put options, and the S&P 500 often sees a short-term decline soon afterward.
Conversely, when we see a sharp contraction in the Barometer (and the Rate Of Change drops to -10% or more), then we often see the S&P rebound shortly thereafter.
In brief: when it comes to the "here and now", which in the Fed's centrally-planned market is driven almost excusively by momentum ignition algos, complacency indeed rules. But even the nearest glimpse into the near future, or rather how the present environment may disconnect with what may happen tomorrow, or next week, or, as the case may be, in three months, institutional investors are more concerned than ever before. But is this a confirmation that the US stock market is about to have its own "Dubai" moment?
The answer is unclear. Recall that it is the same "institutional" smart money that has over the past 5 years been hedged by shorting a hedge fund hotel of most hated stocks: the same stocks which as we have shown time and again consistently outperform the market, due to one after another furious short squeeze. Perhaps hedge funds have gotten tired of "hedging" (and generating losses, with hedge fund alpha virtually zero since the Lehman collapse) using cash products, and are now simply rolling over collared protection with every passing month as the stock market rises to recorder highs, well above levels that in 2007 precipitated a crash that nearly wiped out the financial system?
As for whether they are right, well: the best person to ask is Janet Yellen of course. Because with the Fed now permanently broken the business cycle (as any prolonged downturn in the economy will merely bring the Fed back out of hiding and bidding up risk assets), virtually nobody knows just how to trade this centrally-planned construct that the Fed has unleashed on the world.
As for the retail investors, not only do they not know, but as it is quite clear by now, they don't care either.
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Nothing to fear but..
"There is nothing to fear but the FED itself"
Nothing to VIX but VIX itself.
Its just a 1 coorelation to spy
Quite a dump going on now
IS THAT A SHOOTING STAR OR IS THE SPY HAVING ERECTILE DYSFUNCTION?
To boldly go where no stawk market has never gone before....
We already know the sheeple are afraid. Congrats to TPTB for engineering this perfect situation of enslaving the 99% and making them afraid of their own shadows. Next step, get the guns.
Does anybody have an "Angry" index?
More FED Cheerleading from the sycophants on Wall St.
http://video.foxbusiness.com/v/3639569845001/gold-is-not-an-investment/?...
DaddyO
Damn slow computer. Must be the NSA
If you really want something to fear then --->
.
WORMWOOD: Harbinger of the Apocalypse
are you buying that? Or was that just for entertainment?
Well - that was uplifting. However, in defense of Senor Ferada, it seems we all have a sense of impending doom. We pin it on the government, the monetary system - take your pick; could it be that what we are collectively feeling is what some prophesy has indicated? I've had this feeling since at least the 1970's and I have seen things in the last 20 years that most people would call me crazy if I told them about them. I'm glad my extraordinarily sane wife of 31 years has witnessed what I'm alluding to or I would consider myself crazy.
I think we all play an active role in this (somehow).
Anyone with even a layman's understanding of astronomy knows that Herculobus/Nibiru stuff is horseshit.
....October. Traders should fear October, 2014.
It's my birthday in october... Is this a headsup that I'm not going to get my present?
You'll want to double down in October, just for good luck.
Not only no present but no future either
Ah, but the correlary also holds: When there is nothing to drink but beer itself, drink beer.
Yes indeed
Complacency kills.
- A Wildland Fire Crew Boss I worked for
I misread this as "Complacency Skills" and it strangely made sense to me. It's likely a required resume bullet to work at the Fed.
Is it bullish or bearish?
Bullish, the CB's will do their job.
yeeehaw ... 63% are still bullish ! ... cup more than half full !!
BTFAH !
VIX fully disconected. That's what happens with artificial interference.
Calm down, dysfunctional financial indicators are a completely normal symptom in central planning.
I read that as "central spawning"..which also makes sense in a weird sort of way.
50% 3x spy
20% momo
30% biotech
go fishing
And the whole package levered ........times fonz!
OKAY PEOPLE, THIS PLANE IS CRASHING!!
PLEASE PUT UP YOUR TRAY AND CROSS YOUR ARMS AND YOU'LL ALL BE FINE....
seriously. The signs are obviously there. Its only a matter of time until the masses see it.
The engines cut off in 2008 and weve been gliding ever since. What were feeling right now is the treetops scraping the bottom of the plane as we come in for the BIG ONE! Brace for it.
Brace for anihilation!
They must be able to counterfeit this bitch to at least 2000 on the S&P, dont you think?
Now the FED would say, Okay little people, have another drink courtesy of the FED, and by the way we'll be making a premature arrival shortly.
Fear of lack of fear? (Back to sniffing the Ol' Vix. Ahhhhh.... I love the smell of Vix in the morning. It smells like ______________)
Soon to be all-time-higher.
It will crash when the Companies quit the buybacks....they are the only buyers
Gamma to the downside indicating that this won't be a minor move down, but a sharp move down.
No immenent fear, but when fear begins to creep it will move back into the market rapidly. That is what is being priced in right now. All it takes is a couple of strategically placed headlines to get the algos going and things flowing (disclaimer: whenever they want to make the move).
yes - your'e right, except I was thinking the same thing about 400 SPX points ago
Anyone know the dates on that charts?
nm, starts '98 I'm guessing.
I find it interesting that the kind of folks making money in this market are very often the ones who will scream "Socialism!" at any talk of fixing the huge income disparity we have.
Yet that market they play and profit in is anything but free. As the article states, it is now a CENTRALLY-PLANNED market. That type of central planning is a feature, not of socialism, but of communism.
So, our so-called 'capitalists' are in fact nothing but a bunch of friggin' commies. Just because they put on top hats and monocles and walk around saying "Free Markets!" doesn't change the fact that they are in fact communists at the core.
What are these nouveau-Commies gonna DO when they run out of other people's money?
This is Amerika.
When Warren Buffet gets a bailout, it's capitalism.
When some broke-ass motherfucker gets food stamps, it's socialism.
Don't search for logic. Just accept the facts: This farce is fucked.
Re: gonna DO when they run out of other people's money
Most humans are pathologically optimistic short-term thinkers. So, I would guess, the nouveau-commies are thinking: "There's a sucker born every minute" (and I suspect they might be right).
Can you please bother me with this later? I'm busy dressing my windows...
Why the fuck is the Federal Reserve advising us stock markets are fairly valued?? Another example of how criminal they have become..
They've got very complex models which show what the correct price of everything is. They are just sharing this information.
Some A$$wipe on Bloomturd yesterday saying that "5 years into the recovery we're about where we should be"
We have nothing to fear but the Fed and they are fed up with fear of their "market".
Upside down, naked and ass fucked. Sounds about right.
did he define who exactly "we" is?
Well, has the Trash Class ever mattered?
Fear is one of the main ingredients of the gold price. Some others are weak and/or crumbling dollar and/or moar war.
There can a contrarian argument, stocks rise as fear subsides. The actual ratio is in excess;
http://www.thestreet.com/story/12750494/1/putcall-ratio-is-falling-to-a-...
It's a tough indicator I've found, it can change as easily as the market can.
if i were Suisse i'd hv fear too...ZIRP + no more $$$ laundering, drug money, tax evasion money, arms dealing money, white slavery money plus another missing tape and a fine or two and their model is broke. period.
People have it wrong, the risk is not on equity but on the currency, in which case stocks go sideways while Gold goes to the moon and bonds sink.
The bulk of equity buying is due to stock buybacks, a game that will surely ebb. Retail investors are hardly a player anymore in this equity market. Retail investors have in NET pulled funds from equity and into bonds, and that's another story.
Fear this; the oil market just opened and the price chart is looking like a moonshot. Up $1.33 in about 15 minutes. Meanwhile gold and silver...ZZZZZZZZZZZ. At least there's one market out there that realizes what's happening in the world.
what do you do as parent, or grandparent, and their investing in 401K's from their workplace as i advised them many to do years ago.
now you read this can all be taken away now by the govt. in the next crash which is seemingly a guarentee, thats going to make 2008 look as a blip on the charts, what do i advise now?
Pay off their most expensive debt,
get out of the cities,
learn to live simpler more quiet lives,
network with like minded people,
keep 6 months of food on hand,
learn to shoot,
know where to get water,
stock up on barter goods,
store some PMs,
get or stay healthy,
meditate,,,
;-D
Turn off O-TV and O-Hollywood.
Hey, Do they still make Swiss Miss Instant Hot Coco?
I like that bitch on the package. I used to think she was too old for me but now she looks too young for me. What's wrong with the world?
It's like you're never happy but then you think back at how happy you were and sadly, whimsically, opine, "If I got in the shape I was then, I'd be happy." Problem is you felt fat then. Now look at yourself!
So, Take your money out now before its too late or you'll look back at this time, now, and say, "I should have listened to Kurt because if I had that amount of money now, I'd be happy."
You're Welcome
Or. I'm never listening to that goddamn kurt again, the dow just passed 40k and I'm priced-out forever!
If you look really really close, you can see a couple million unicorns running up that s&p500 chart slope.
Correction... slimy bank "fear barometer".
Unicorns have a horn for a reason.
We may soon be forced to face our economic Armageddon. The forces that have driven stock markets ever-higher and upward may be beginning to wane. Many markets became distorted years ago when QE and super low interest rates hit the economy in an effort to lessen many of the missteps of recent years.
This has been more helpful in holding up the underlying value of assets and derivatives it now appears than helping to repair a wounded economy. QE has up to now stopped an implosion of derivatives including the resulting contagion and shock that would have spread throughout the financial system. Unfortunately the economy has not fared as well as these asset prices and in many ways these policies have harmed Main Street. More on this subject in the article below.
http://brucewilds.blogspot.com/2014/05/facing-our-economic-armageddon.ht...