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VIX Implodes As Low Range, Low Volume, Low Average Trade Size Market Fails At Three Month Highs

Tyler Durden's picture




 

Is it us? Today felt very nervous. The equal narrowest range in S&P 500 e-mini futures (ES) in over 3 months along with dismally low volume and even worse average trade size as we peaked over July 5th's swing high and fell back. Aside from the farcical trading in the big Dow supporting stocks that we just noted, most asset classes traded along with stocks - in a very narrow range. The big movers were oil - up over $92 - on Israel-Iran tensions (among other things) and the major financials - which in general have retraced all of their post-EU Summit euphoria now (with MS breaking down 6% today). EURUSD did its by no standard dip and rip through the US open to EU close and ended the day unchanged. Treasuries limped a little higher in yield (~1-2bps). VIX plummeted to 15.45% (zero premium to realized vol), down 0.75vols - its lowest close in over 3 months - but this was not enough to provide any more juice for stocks which meandered, ending fractionally higher. Gold and Silver slithered sideways - with a very modest upward bias as Copper was helplessly led a little higher by Oil's exuberance and a slight limp lower in the USD on the day as the AUD extends its gain to 2% on the week against the greenback. We can't help but reflect on this chart as we see a retest on low volume and low average trade size following the very same path as last year.

Gold, Stocks, Treasuries, and the USD all stayed generally in sync and trod water all day...

as ES meandered around VWAP all day...

And Oil stands out as the big mover...

and while the term structure of volatility continues to collapse, VIX remains in a world of its own as far as complacency...

For clarity, as we noted this a few days ago, while VIX has plummeted, it has reverted to its historical vol here - which given the forward-looking events - FOMC/Jackson Hole/German ESM judgement etc. seems a little overdone to the complacent side one way or the other...

but based on our preferred measure of realized vol (Rogers & Satchell - which accounts not just for close to close manipulated vol but the potential for intraday swings and therefore gamma), this is the lowest premium to realized vol in 8 months - pre globally coordinated awesomeness...

and the major financials are separating into the ugly, the bad, the good, and the incredible - new normal...

 

charts: Bloomberg

 

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Thu, 07/19/2012 - 16:29 | 2633571 cat2
cat2's picture

get this doom outta neutral

Thu, 07/19/2012 - 16:55 | 2633661 5880
5880's picture

VIX "plummeted" to it's 30 day HV?

Who the fuck is writing this shit?

Thu, 07/19/2012 - 16:33 | 2633583 asteroids
asteroids's picture

The thing that will be studied was the "dip" on bad news. The computers had a tough time of it, I think. Then, "magically", it started to lift. It's like a human stepped in and took control for 15mins and then gave it back to the computers.

Thu, 07/19/2012 - 22:54 | 2634728 Dr. No
Dr. No's picture

That was Neo kicking @ss on an agent

Thu, 07/19/2012 - 16:33 | 2633586 q99x2
q99x2's picture

Everything has become brittle. No wriggle room left.

Ice Nine Bitchez.

Thu, 07/19/2012 - 16:40 | 2633598 Turin Turambar
Turin Turambar's picture

Sheesh, the market looks like a swimmer treading water in a tank full of disinterested, satiated piranhas.  I keep expecting something very ugly to happen, but the swimmer keeps yucking it up and having a grand old time while absolutely NOTHING happens.

UNBELIEVABLE!

Thu, 07/19/2012 - 17:28 | 2633774 mick68
mick68's picture

My thoughts exactly. You can just feel it coming, the PPT must be working their cans off to keep this mess afloat.

Thu, 07/19/2012 - 16:39 | 2633606 youngman
youngman's picture

Very wierd day...lots of bad news I thought...but the markets needed to go higher for some reason...and they did...they pumped it up.....now who is "they"..that is what scares me...I do not know...the Fed...Politicians...NSA...Obama´s bankers in pocket...???   and gold and silver are fixed now..have been for a couple of months at a pre negociated price between countries I think...

Thu, 07/19/2012 - 17:35 | 2633798 mick68
mick68's picture

The market has nothing to do with reality or the economy...obvously. This ponzi scheme is rigged from top to bottom by the PPT, banksters, FED, and who knows who else? Bulls enjoy the temporary ride, cause when reality hits, IT'S GONNA BE A LOOOLOOO!!!

Thu, 07/19/2012 - 20:53 | 2634360 hedgehog9999
hedgehog9999's picture

They is a combination of Central banks and their banking agents. It is not really that hard, all you have to do is target an instrument or two where everything flows from, eg the VIX futures, the $USD futures and the SPX futures. Since you don't care about making or losing money, just putting a constant bid or sell of small size (to minimize cost) on the market you are supporting, you just do it overwhelming every sale or buy that comes your way.....of course , this only works when the selling or buying pressure no matter how strong is relatively contained.

Picture a strong dike on a dam where there is a few holes and superman is working overtime plugging any leaks that come along, now imagine these leaks keep increasing in frequency and strength, superman now needs a helper which he does not have, now picture if you will black kryptonite which is oil increasing in price like crazy and food prices going through the roof threatening chaos in a few countries, the kriptonyte will weaken Superman and eventually the dike will collapase giving way to a major flood forcing everyone to bail out thus increasing the flow of water.

The flow is so strong that at some point (with a weakened  Superman's help) the flow goes backwards , much like a Tsunami clearing the beach prior to the next bigger wave which comes roaring right after, at this point Superman's efforts are pointless as he's too weak to do anything at that point.

There you have it in layman's terms.......

By the time it is all said and done the SPX should be limping around 1100 if we are lucky..... 

Thu, 07/19/2012 - 16:45 | 2633627 hugovanderbubble
hugovanderbubble's picture

Fuck Credit Suisse TVIX

 

Thu, 07/19/2012 - 17:16 | 2633730 otto skorzeny
otto skorzeny's picture

when do I pull the trigger on that POS-I'm loaded for bear

Thu, 07/19/2012 - 16:51 | 2633645 divedivedive
divedivedive's picture

Don't options expire tomorrow ? Funny I didn't hear that mentioned all week.

I expected IBM to pop over $200. 

Thu, 07/19/2012 - 16:52 | 2633648 zonkie
zonkie's picture

TVIX may not be a bad buy today, with VIX down to 15 it is bound to spring up to 25, you should see 100% return on TVIX from these levels almost guaranteed in next 1-5 weeks

Thu, 07/19/2012 - 17:19 | 2633739 otto skorzeny
otto skorzeny's picture

do you work for GS?somebody posted the same thing last week when TVIX was $4.25

Thu, 07/19/2012 - 17:35 | 2633807 HarryM
HarryM's picture

or short XIV

Thu, 07/19/2012 - 20:41 | 2634404 J 457
J 457's picture

If you must, use UVXY instead of TVIX.  It tracks the underlying closer.

Thu, 07/19/2012 - 16:54 | 2633657 ObungaBoy
ObungaBoy's picture

The short interest is higher than in May

Tomorrow the put options will expire

The premium of all options is getting lower and lower – that is why VIX is going down

So everything is going according the plan  

Thu, 07/19/2012 - 16:55 | 2633658 Hype Alert
Hype Alert's picture

Today lacked the punch of the last few even though they were on low volume.  Picture Wile E Coyote.

Chart wise, it looks a lot like July of last year.  The economic data has been terrible and the market keeps going up on low volume.  That has to change at some point.  No free lunch despite what Bernanke and Obama think.

Thu, 07/19/2012 - 17:19 | 2633741 Piranhanoia
Piranhanoia's picture

This is the Tyler that has a lot of coffee. 

Thu, 07/19/2012 - 17:59 | 2633892 kalasend
kalasend's picture

The market is primed for a good fuck so QE3 can be launched according to plan and will be welcomed by many

Thu, 07/19/2012 - 19:05 | 2634105 slewie the pi-rat
slewie the pi-rat's picture

L0L!!!  there is only one tyler b/c tyler sez so..., ..., ...?

tyler>--->: this is the lowest premium to realized vol in 8 months - pre globally coordinated awesomeness...

globally-cooo,000,OOOrdinated awesomeness to go NOWHERE while funding BK goobermints with ponzi papier du jour which fungibilitizes into what hasn't vaporizated to date... yet

...and where she stops, nobody kows...

fungicide the wonder horse!

Thu, 07/19/2012 - 22:07 | 2634624 fuu
fuu's picture

Welcome back!

Fri, 07/20/2012 - 01:37 | 2634937 Yen Cross
Yen Cross's picture

 gsgYou are missed! I'm going to sleep!

                        I have board room meetings in 2 hours!~

Thu, 07/19/2012 - 21:21 | 2634508 chump666
chump666's picture

With HFTs holding MA supports...get the hell outta dodge.   This thing is ready to blow south.

Going to be epic.

Thu, 07/19/2012 - 21:43 | 2634562 chump666
chump666's picture

If HK and Shanghai crash current session...maybe the start of a market crash ala 1987.

 

 

Thu, 07/19/2012 - 22:10 | 2634633 chump666
chump666's picture

PBOC intervention talk as USD/CNY briefly tests upper limit of band

Mad USD buying outta of China, this is bad, market is getting closer to the tipping point. 

Fri, 07/20/2012 - 01:35 | 2634935 Yen Cross
Yen Cross's picture

  Sweet.

Fri, 07/20/2012 - 01:53 | 2634957 chump666
chump666's picture

yeah i think Asia just reminded the world who actually pays the bills.

US markets are due for payback total disconnect trade riding on bernanke's heroin...

Fri, 07/20/2012 - 00:16 | 2634866 hyper-critical
hyper-critical's picture

You need to connect this to what you point out in your Skynet post. That's the real story. It's even happening in currencies, ie USDJPY

Fri, 07/20/2012 - 01:34 | 2634933 Yen Cross
Yen Cross's picture

 A secret about "VIX: POOF!

Fri, 07/20/2012 - 02:08 | 2634971 chump666
chump666's picture

ah yeah all of asia is neg.   bernanke you sick f*cker you got the oil bid, nice, you think you can handle the fury of the east? 

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