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 [6], 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 [7] 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...
[8]
as ES meandered around VWAP all day...
[9]
And Oil stands out as the big mover...
[10]
and while the term structure of volatility continues to collapse, VIX remains in a world of its own as far as complacency...
[11]
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...
[12]
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...
[13]
and the major financials are separating into the ugly, the bad, the good, and the incredible - new normal...
[14]
charts: Bloomberg