It took the market several weeks to fool the last momos going long this market. We are seeing the biggest daily drop this year in todays session. Over the past weeks people have been buying equities, selling vol, and all agreeing “volatility is dead”.
Well, reality is back, vol is spiking, and the confident investors is scratching his head. Below is a chart of SPX and the VIX. Note what has happened when market crosses these “magical” levels. Last time VIX traded at these levels (for more than a day or two), SPX was at 1300. The other times VIX crossed these levels in a similar fashion, markets collapsed. What’s next?
Many would say; “Great”, but charts don’t lie. Despite the benefits of the mighty LTRO, the Greek “fix”, and Apple (still) up, markets have not performed well for the past month. Take this down another 3-5% and people will start getting nervous for real.
Welcome to reality charts below;
Finally reality is knocking on the door. The Teflon market, churning higher on no volume, is taking a pause. The no volume, low volatility market has attracted many new “smart” and confident longs. Even Bank of Israel is now engaged in trading Apple (according to ZH).
The markets have shown signs of “strange” behavior lately. The “secret” GLD and SLV seller surprised many when hammering the metals last week. Yesterday’s mini flash crash in Apple, has suddenly reversed investor sentiment across the markets. Meanwhile, the credit markets have continued underperforming.
People still talk about Greece (and about Alex Hope, the FX trader), but the elephant in the room, Spain, is still neglected given the size of the potential problems arising in Spain. Remember how it all started in Greece? Yes, Spain is following the same path. Having spent another 90 billion Euros more (that it doesn’t have) than projected in 2011, things will start heating up in Spain. With unemployment sky rocketing, the property bubble about to implode for the second time, Spain does not need a credibility problem. Espana, everything under the sun. More on the Spanish Economy and the (in)famous ghost towns of Spain below;
Despite the markets falling “hard” today (yes the market can go down), still the number one news seems to be regarding the Big Spender in Liverpool. Focus should be shifting towards Spain, and the 90 billion “miscalculations”, but here is the quick detour to Liverpool. From the Mirror;
The businessman who blew £203,948 on bubbly in a single night as he entertained celebrity guests at a top hotel was a 23-year-old City whizkid.
Young financier Alex Hope splashed out £125,000 alone on a giant bottle of one of the world’s most exclusive champagnes.
He also popped the cork on lots more vintage fizz for guests including Manchester City footballers Joe Hart and Adam Johnson and Man United star Wayne Rooney’s wife Coleen.
Drinks are on him! Mystery businessman picks up staggering £204,000 bar tab including £125,000 on ONE bottle of bubbly (Full reading here).
China cut its annual growth target for the first time in eight years on Monday, recognising that its double-digit growth rates are past and the world’s second largest economy will slow as it matures, http://ftalphaville.ft.com/thecut/2012/03/06/909791/china-ditches-double-digit-growth/
The FT reports that a large group of private creditors agreed on Monday to take part in the multibillion-euro Greek debt swap in a step forward for Athens as the country struggled to avert a sovereign http://ftalphaville.ft.com/thecut/2012/03/06/909771/athens-enjoys-bond-swap%e2%80%89boost/
Companies lined up to sell dollar-denominated debt in what was the busiest day for issuance so far this year after yields in the corporate bond market fell to record lows, reports the FT. Corporate bonds have rallied in recent months as investors search for investments that offer a higher yield than US Treasuries. http://ftalphaville.ft.com/thecut/2012/03/06/909751/scramble-to-sell-us-debt-as-yields-hit-record-lows/
The FT reports that Angela Merkel, the German chancellor, is facing growing pressure to accelerate the introduction of a financial transaction tax in Europe, in order to win approval for the eurozone’s http://ftalphaville.ft.com/thecut/2012/03/06/909731/opposition-presses-merkel-on-transactions-tax/