Going nowhere fast was the theme today as equities managed to end practically unchanged (SPX/Dow down, NDX up) but intraday saw some very gappy behavior (though admittedly in a very small range). VIX is the story of the day in our view - realized volatility has dropped to near-record lows (which had, until a week ago, been a big driver of front-end implied vol compression) and yet VIX pushed higher (with implied vol now at almost a three-month high premium to realized). The point being - protection is bid, and a VIX of 16.5% is much more concerning given its premium than some would believe. Volume was above its very recent and dismal average but still around 15-20 percentage points below normal summer doldrums levels. Risk assets in general trod water today with modest outperformance by Treasuries (yields lower 1-2bps) and negligible moves in FX carry trades - even as the USD is down 0.35% since Friday (mirroring Silver's 0.35% gain). With Consumer confidence dismal, somewhat strangely both Consumer Staples and Discretionary outperformed on the day. Very low average trade size, a low high-low range, and a general inability to pull away from VWAP (+/-3pts only) suggested everyone is on hold (or buying protection as we noted above); but the small flush into the close was not very encouraging.
The Dow and S&P closed very slightly red and Nasdaq green - with a late-day stumble confirming the bias to VWAP...
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...leaving broad indices leaking into the close but the Trannies still notably divergent...
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Realized vol (orange) has dropped significantly in recent weeks (which will come as no surprise to anyone) but the last week has seen implied vols move higher against this. The premium between implied and realized vol (lower pane) is now near three-month highs - and so while some would see a VIX at 16.5% as 'normal'; the premium tells a much more concerned story.
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and commodities generally leaked higher (except for Chinese-prone Copper) though nothing write home about...
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The disconnect between Treasury yields and stock prices has reverted back to recent 'easing' highs - though we note our recent discussion of the more importance of real rates (and breakevens)...
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and it seems that stocks and gold have slowed their exuberance in the last week as to the Fed/ECB's ability to reflate in the short-term (though 10Y TIPS remain active)...
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Charts: Bloomberg and Capital Context