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Complacency At 5 Year Highs

Tyler Durden's picture




 

Short-term expectations of volatility, as measured by VIX, traded down close to a 13% handle this morning as the so-called 'fear' index dropped to practically its lowest level since July 2007. As we mentioned last week, complacency is back in more ways than just the level of VIX. Realized volatility, especially after last week's small range and low volume markets, has fallen but implied volatility is now at its most 'complacent' relative to realized vol since the end of LTRO - as it appears anticipation of the fully-expected printing-press euphoria is priced into both asset and vol markets. Furthermore, the term-structure of volatility, which measures short-term concerns relative to medium-term, has fallen at its fastest pace in 5 months (again confirming short-term complacency) and has only been this steep (short-term volatility dramatically low relative to medium-term volatility) once since the March 2009 rally began - right near the post-LTRO2 highs in the S&P.

 

VIX at 5 year lows...

 

and the term-structure of implied volatility has only been this steep (short-term complacent) once before since the March 2009 rally began - and that was the highs in March/April 2012...

 

and relative to historical vol, the S&P 500's implied vol is now its cheapest since the end of LTRO2 - as once again hopes of central bank extravaganzas are priced in...

 

Charts: Bloomberg

 

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Mon, 08/13/2012 - 10:14 | 2700688 mrktwtch2
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it may see a 12 print in the vix before bottoming out..if thenill keep averaging down in the tvix..

Mon, 08/13/2012 - 10:14 | 2700689 orangedrinkandchips
orangedrinkandchips's picture

SLINGSHOT!!!!!!

Mon, 08/13/2012 - 13:05 | 2701092 Freewheelin Franklin
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WRISTWATCH

Mon, 08/13/2012 - 10:15 | 2700693 ebworthen
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Have they fooled everyone who was crushed by the 2008 debacle to buy equities again, or are they just playing with themselves?

Far as I can tell the propaganda and Bernanke's effort to force people back into equities hasn't worked and people are doing the unthinkable - cashing out or buying low yield bonds.

Mon, 08/13/2012 - 10:18 | 2700700 Hype Alert
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The market is so use to getting its fix that it doesn't even have to fall anymore to expect it. 

Mon, 08/13/2012 - 10:18 | 2700702 Awakened Sheeple
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"Look at them. Calm as Hindu cows."

Mon, 08/13/2012 - 10:18 | 2700704 malikai
malikai's picture

I guess it's time to go put shopping..

Mon, 08/13/2012 - 11:16 | 2700850 Sisyphus
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Oh man?

Mon, 08/13/2012 - 10:19 | 2700708 adr
adr's picture

If the market hits all time highs, and nobody actually owns a stake in it, does it still make those people money?

I guess that is the ultimate Keynesian question.

Mon, 08/13/2012 - 10:21 | 2700714 Headbanger
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Did I just hear someone say 'Iceberg dead ahead!"

No, can't be..

Mon, 08/13/2012 - 10:21 | 2700715 govttrader
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Time for patience...the market is the gift that keeps on giving...thank you algos

http://govttrader.blogspot.com/

Mon, 08/13/2012 - 10:22 | 2700719 Blopper
Blopper's picture

Those following VIX will be greatly disappointed by the end of this year.

Mon, 08/13/2012 - 10:23 | 2700726 JustObserving
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Nothing to worry here - Ben will handle the problem of infinite debt with zero interest rates.  Heck, we may even have have negative interest rates.  All Ben has to do now is keep a lid on gold and silver.  With zero interest rates, the stock market will levitate - so no QE needed either.  Not to worry about the quadrillion in derivatives - Ben has that covered too.

What volatility do you expect in a controlled "market"?

Mon, 08/13/2012 - 10:26 | 2700733 slaughterer
slaughterer's picture

Large-block sells on the ES two times today so far.  

Mon, 08/13/2012 - 10:26 | 2700736 LoneStarHog
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Uh! ... How many reports have we read that virtually ALL TRADING is by HFT computers, and that CARBON-BASED traders are virtually nonexistent? ... So are we now to believe that HFTs are capable of silly things like FEAR vs. GREED? ... Gee, could the U.S. Goobermint also be controlling the VIX, like every other damn thing? ... I guess that this means when the markets crash you will NOT want to be walking below tall buildings due to the number of jumping computers.

 

Mon, 08/13/2012 - 15:35 | 2701659 Xanthias
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Govt control of the VIX?  Get out of town!  Next thing you'll be telling me Obama girl's a paid actress.

Mon, 08/13/2012 - 10:30 | 2700749 Temporalist
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Complacency?  I just bought Facebook!  I'm set for life!

Mon, 08/13/2012 - 10:46 | 2700799 malikai
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Welcome to the 99%!

Mon, 08/13/2012 - 10:39 | 2700770 hugovanderbubble
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Long TVIX¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡go Credit Suisse¡¡¡ 

Mon, 08/13/2012 - 10:43 | 2700789 RationalPrepper
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Trying to short using VXX has killed me the last few months.  I'm thinking about buying some more calls expiring towards the end of the year, just to hedge my mining and resource stock shares.  But I think my money might be best used to build liquidity insteady.  What do the rest of you ZH-ers think?

 

Mon, 08/13/2012 - 10:45 | 2700795 yogibear
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The war of the trading bots. Computer and algorithm  against Computer and algorithm. Until a trading house blows up. Each taking money from each other. There will be those that loose enormous amounts of money. Goldman always hires the top programmers and mathematicians.   

Mon, 08/13/2012 - 10:46 | 2700798 LongSoupLine
LongSoupLine's picture

 

 

Retail eaten by corruption and HFT = low VIX

 

HFT eating other HFT when no food is remaining = record low VIX

Mon, 08/13/2012 - 11:01 | 2700823 Dr. Engali
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Good little sheep ...go to sleep. When the vix hits 10 it's time for the slaughter.

Mon, 08/13/2012 - 11:08 | 2700833 Arnold Ziffel
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China's Largest Broker Plunges on Loss Rumor

 

Shares of Shanghai-listed Citic Securities, China's largest brokerage firm, fell by 9.1 percent on Monday after rumors the company had suffered a large 2.9 billion yuan ($460 million) loss on overseas trading.

 

http://finance.yahoo.com/news/chinas-largest-broker-plunges-loss-1416548...

Mon, 08/13/2012 - 11:15 | 2700846 pleseus
pleseus's picture

More signs of a market top.

Mon, 08/13/2012 - 11:53 | 2700935 JimboWHO
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This can't be good.  At all.

 

 

https://home.wellsfargoadvisors.com/james.malmstrom

Mon, 08/13/2012 - 12:56 | 2701067 Crispy
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My eyes saw Maelstrom...

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