News That Maters
Ft.com
Saudi Arabia’s powerful oil minister, Ali Naimi, made a rare intervention into overheating oil markets on Tuesday, declaring that high oil prices were “unjustified” and vowing that the kingdom would boost its output by as much as 25 per cent if necessary. As the west’s nuclear stand-off with Iran escalates, oil prices have rallied this month to a post-2008 peak of $128 a barrel with markets bracing for European Union sanctions on Iranian crude that could knock out a chunk of global supply. http://www.ft.com/intl/cms/s/0/f9f8eb00-729e-11e1-9be9-00144feab49a.html#axzz1pj9puJ70
European banks are preparing a new type of securitised vehicle bundling together loans to commodity trading houses to try to resolve the credit crunch in the commodities industry. The banks, including BNP Paribas and Société Générale, are testing the appetite from European pension funds and insurance companies for the instruments and hope to launch the products before the end of the year, executives said. The move comes after French banks, the main financiers of trading houses, reined in their lending due to a shortage of US dollar liquidity. BNP Paribas and a handful of other European banks provide most of the credit lines that underpin the business of the Swiss-based traders that dominate global raw materials markets. Commodities bankers and industry executives said the securitisation would allow the industry to access fresh credit. http://www.ft.com/intl/cms/s/0/f8f4c83c-72b2-11e1-ae73-00144feab49a.html#axzz1pj9puJ70
All news below.
Third Steepest First-Second Month VIX Futures Contango Ever
Guest post by Bill Luby of Vix and more.
For a variety of reasons, investors seem unwilling to embrace the current rally and with each day the market rises, I see a scramble in the indicator forest to find some sort of proof that stocks are finally, inevitably going to correct…and soon. I need to give this phenomenon a name, so I am going to call it indicator hunting and define it as a companion to confirmation bias.
I discussed this subject a little over a month ago in What the VIX Kitchen Sink Chart Says (it hasn’t said much lately, but I’m trying to teach it sign language), when I noted:
“One of the more interesting developments of 2012 has been to watch the diminution of the strident bearish narrative that has been focused largely on the collision course between a preponderance of debt and low or negative growth. The bullish beginning to 2012, however, has not prompted many in the way of converts to the bullish camp. Instead, there have been whispers of ‘…overbought…’ that have turned into a soft murmur and are now verging on becoming loud chorus. Suddenly the general consensus seems to be that stocks just do not deserve their current lofty valuation.
In this type of environment, many investors become particularly susceptible to confirmation bias and scramble to find one or more indicators which will tell them what they have already begun to believe: that a major correction is likely just around the corner.”
A VIX of 15!?! Meet the New Reality
Guest post by Bill Luby of Vix and more.
When the VIX recently slid below 20.00 for an extended period, I sensed a noticeable unease about the state of the market in many traders and investors. Clearly a sub-20 VIX was underestimating the risks in the current and future market environment, they thought. When the VIX dipped below 18.00 that unease intensified and now with the VIX hovering around the 15.00 range and I can sense that quite a few are ready to grab the nearest pitchfork and riot about the inhumanity of the wayward VIX.
I will be the first to admit that there are a number of perplexing geopolitical, macroeconomic and other factors that pose real threats to the economy and to stocks, but I also believe that investors have become so fixated on some of the past problems thatavailability bias and disaster imprinting has clouded their judgment to the extent that they cannot separate the current market environment from the ghosts of markets past.
Is VIX suggesting market collapse around the corner?
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?
Chart Update-Sell off around the corner?
With the last momos going long in an inverted panic mood, let’s review some important charts.
Many European indices have reached important resistance levels. The SPX is also at resistance levels, and managed putting on a very similar formation to last time it topped out. VIX is making a higher bottom. Time for these new smart bulls to feel the heat.
Let’s see how this trades 3-5% lower….Full Chartology below.
Chart Update
Below are some random charts worth viewing.
Market and Economic Indicators
Charts by Macro Story:
A weekly update of market and economic indicators across various asset classes. Charts below.
Remember that Lehman week? What happened to volatility and the market? Similarities to 2008 and Lehman Brothers? Yes.
The equity market has been trading in a rather peculiar mood, still dominated by news primarily out of Greece. Other risk measures on the other hand have shown escalating concerns of risk. Credit and volatiliy are currently implying something different to the equities market. Let’s see who will get the upper hand. Meanwhile some observations from last Friday’s action.
On Friday the SPX was unchanged at the lows over the course of five hours, yet TVIX spiked 15.5% in that period, a huge intraday deviation from the
normal negative correlation. Last week we saw app 22% jump in the VIX, while the SPX remained flat. The week of September 15, 2008, when Lehman
filed for bankruptcy the Vix gained app 22% in a week (close to close, although it traded much higher intra week)) and the S&P was practically flat. Is something about to happen? Observations with charts below;
Market and Economic Indicators
Weekly Charts by Macro Story.
Market and Charts Review. Sell while you can 2.0
Time to review some charts as the last momos try squeezing out the last percentage gain in this prolonged Santa rally.
Full chartology below.
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