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Showing posts from 2008

December Expiration

Tuesday will mark VIX December's expiration, marking yet another volatile month. The good news is that the VIX has retreated from its mid November high of 80. Although still considered to be very high, a retreating VIX has allowed some investors with a window of buying opportunity. The bad news is that it appears that this window was not open for too Long. With the current VIX level, fear still surrounds this market. Investors are concerned about the Big 3, the implications of a new Obama Administration, and more wall st. scandals. Perhaps January's VIX will lead to more clarity.

Vix Retreats, but for how long?

In the past two days of trading, the VIX has plunged to 64.70 and is down 20 percent since it's record high last Thursday. Clearly, The government bailout of Citigroup and President Elect Obama's announcement of the Chairman of the New York Fed Timothy Geithner to be the next Treasury Secretary has sparked this market rally. Unclear however, is how long all of this will last. The economy still has not healed from bad news in home sales, unemployment, and the bleak situation of financial institutions worldwide. In light of all this, are we starting to climb out of this financial abyss or was this just a bear market rally? Time will most certainly tell.

VIX Blocking Buyers

With stock prices at record lows and with what appears to be a buying opportunity of a lifetime for investors, the question remains why haven't we seen any buyers? The answer may lie within the VIX. Despite this buying opportunity fear has not only taken over but it has also obstructed the buyers from entering. You can read my quote in last week's LA. Times touching on this point. http://www.latimes.com/business/investing/la-fi-markets30-2008oct30,0,3295392.story

Today's VIX

You can add the VIX to list of things that have profited in this declining market. An index that few knew much about, is now an important market indicator. It's so important that many investors claim that's it's just as significant as the Dow Industrial Average. Dan Deming has been on TV and in newspapers explaining not only this point, but using his expert analysis of the VIX in explaining investor sentiment. Here are some excellent links caputuring his opinions.
1. www.cnbc.com/id/15840232?video=849219817
2.http://www.cboe.com/TradTool/webcast.aspx?channel=885&movieid=42513
3. http://www.suntimes.com/business/1237013,CST-FIN-vix23.article
4.http://www.jsonline.com/story/index.aspx?id=805405
5. http://www.cboe.com/TradTool/webcast.aspx?channel=885&movieid=42417
6. http://www.cboe.com/TradTool/webcast.aspx?channel=885&movieid=42233

Investor Advice

Dear Friends:

I would like to add some thoughts to the conversations we have had over the last weeks about the wild markets.


1. If you were to ask me for my personal opinion this is it: I don't know if Friday was the bottom but there is a good chance it was and I think the market could go back to 10,000 in a flash. Take a look at JNJ below, which is typical of the blue chips classic charting bottom during Friday's whipsaw. These kinds of bargains will not last for long, and once we have bottomed these falsely low prices will be replaced by a strong recovery.





2. For me, the idea that we would go into a steep economic decline is just not valid. As a student of economics what I have witnessed is a classic market panic, a once in generation kind of thing and something that tends to come back quickly once confidence is restored. Panics do have roots in real things; here the de-leveraging of banks bloated and risky balance sheets, but for me, their losses are just the retaking of their…

Where's the bottom?

Brian Stutland was interviewed by the Chicago Tribune to get his take on what was happening in last week's declining markets. When asked about where the market was headed last week his predictions were fairly accurate, "I'm expecting another 5 or 10 percent down before it's all over," said Chicago trader Brian Stutland, president of Stutland Equities LLC. "We may be nearing a bottom, but it was definitely real panic selling [Thursday]." Here's the whole article

http://www.chicagotribune.com/business/chi-fri-crisis-calm-fearoct10,0,7305861.story

Big Rally, Dow reaches 9,000 as VIX retreats

Reacting to one of the worst weeks on Wall St, the Dow rebounded over 900 points to close at 9,387 on Monday. Coming off record highs over 75, the VIX finally came back down to earth closing just under 55 down 21%. The big rally's impetus early Monday morning as markets worldwide reacted positively to European government's interventions into the banking system, pouring billions worth of capitol into world banks. Echoing this tactic, Treasure Secretary Paulson is rumored to do something similar tomorrow. Dow futures are already reacting positively to the news up 192 points in early trading. The question remains however, with the economy still in turmoil, how long will this rally last?

Dow under 10,000

For the first time since 2004, the Dow Industrial Average hit below 10,000 this morning. News around the world was not much better as the sum of all fears of a downward spiral in the credit crunch has spread globally. In Europe early Monday morning, banks continue to decline especially in Russia. Sberbank, Russia's biggest bank, dropped as much as 22 percent. In South America, the Brazilian Stock Market hit a down limit shut off of 10%. In Us markets, many investors are worried not only over Friday's bailout plan specifically that it came a little too late, but also have a lack of trust in the economy. This fear was marked by the VIX level which was up 23% at 55.64 in mid morning trading. We have not seen these unprecedented numbers in the VIX since 1989. Historically, when the VIX has hit a level this high, it has marked a bottom such as in the 1989 level. However, many are speculating whether or not this is the case in this unpredictable market.

The Vix...."This one goes to 11"

CNBC's Erin Burnett interviewed Dan Deming this morning as they discussed the rising levels of the VIX. Dan referenced the movie Spinal Tap as he compared the VIX going to 11. Also on topic was the House of Representatives bail out vote on Capital Hill. Dan explained that the passage of the bill is not only imperative today, but it has to be passed quickly. Here's the link.

8/25/08 - VIX Futures Continues to Trade at High Levels

Dan Deming, a trader for Stutland Equities, appeared on CBOE TV on Monday to discuss the behavior of the overall market. He mentioned that the VIX futures were trading at quite a premium to the VIX index, indicating that futures buyers are pricing in a sell off in the market. Listen to his broadcast to learn more about his market opinions.

http://www.etvmedia.com/etv/Custom/CBOE/CBOE_hub.jsp?movieid=40304&channel=885

Market consolidating as long as SPX holds 1275, August 13

Dan Deming was on bloomberg TV on Monday discussing how the VIX may be telling us that some sideways trading is taking place. Should the market hold at its recent uptrend at 1275, we should see the new bull market continue. Listen to Dan on his podcast:

http://media.bloomberg.com/bb/avfile/Markets/Vol_Report/v8WuS_.1Kxa4.mp3

DAN DEMING WILL BE APPEARING ON CNBC TOMORROW BETWEEN 8:05 - 8:20 AM CST. CHECK OUT WHAT HE HAS TO SAY ABOUT THE MARKET.

August 6, 2008, VIX Weakens

Dan Deming spoke on Bloomberg TV about the most recent rally in the market and how the VIX futures have softened. Looks like the pros were selling calls in the market place and taking some profit. We'll see if the market can keep making higher lows when it starts to sell off. 1250 in the SPX seems to be a critical hold point.

Listen to Dan Deming at
http://media.bloomberg.com/bb/avfile/Markets/Vol_Report/voRSqiuhdag0.mp3

Tuesday August 5th

The S&P 500 index is up 24 points ahead of today's pivotol FOMC policy statement. The VIX corresponded with a 6.5% selloff. Yesterday, Brian Stutland appeared on Bloomberg T.V. and discussed how the VIX futures' markets were predicting a rally in the broader market, and this one time, Brian looks to have been right. :)

click the link below to listen.

http://media.bloomberg.com/bb/avfile/Markets/Vol_Report/v1VfT0NHoizM.mp3

Wall Street Warriors in the VIX

Today, "Wall Street Warriors," shown on the MOJO channel, finished their filming of their documentary on the VIX. They interviewed 2 of Stutland Equities' finest employees, Dan Deming and Matt Shapiro, to get their feelings on being an independent trader in the VIX pit on the CBOE. The show will air in February/March and discuss the reality of trading options on the CBOE.

Matt Shapiro feels a rally and drop in volatility brewing

Matt Shapiro, President of MWS Capital (a financial advisor company) and trader for Stutland Equities, appeared on Bloomberg TV yesterday in which he felt the recent sell off this week did not have much legs to it. Technically, he sees volatility breaking an udptrend and the possibility we may see the VIX get to as low as 21.

Listen to his podcast and other's opinion on the market:

http://media.bloomberg.com/bb/avfile/Markets/Vol_Report/vVRXKadOhIZw.mp3

A look back at July 2nd and now

Brian Stutland made an appearance on July 2nd on Bloomberg TV, providing insight into the recent breakout of the VIX to higher levels, thus giving an indication of credit concerns in the financial stocks and political turmoil brewing. Check out

http://media.bloomberg.com/bb/avfile/Markets/Vol_Report/vA_5wb5r8uv0.mp3

to hear his podcast recording.

Following Brian's comments, we saw Freddie Mac and Fannie Mae stocks begin to tumble, thus confirming how the VIX's move acted as a leading incdicator to the market. As listed below, however, the VIX may be telling another story about the market in the weeks to come, as it had a huge reversal on Tuesday.

VIX index falls 12%...Dan Deming comments on Bloomberg TV

It sure seemed like a huge reversal in not only the market, but in the VIX index, thus indicating that less volatile times lay ahead. As Wells Fargo raised their dividend and the government continued to pound the table that they will be there as a backstop to credit concerns, volatility may not be as painful for investors in the near future. You can listen to Dan Deming's comments on Bloomberg TV at

http://media.bloomberg.com/bb/avfile/Markets/Vol_Report/vvr7Y9FfIbtQ.mp3

to get a sense of his and other's opinions on the stock market.

Bloomberg TV appearance Feb. 25

I discussed how the VIX has finally broken down below its 50 day moving average, indicating that short term market volatility may be headed lower as bond insurers shore up financing. Feel free to listen to Bloomberg's podcast of my interview,

Audio: Bloomberg Podcast (MP3 format)

So, how should you play this move? Customers have been seen sellling front month VIX futures and buying back month futures, a play that tends to be a bullish spread. Other ways to play a near term drop in volatility would also be to sell out of the money calls in Mar VIX options, anticipating these calls will expire worthless. This strategy is more risky than the futures spread and requires more capital but has a possible huge payout.

Still, keep in mind that overall volatility remains high as concerns over recession and high inflation developing abroad in Asia will keep uncertainty in the marketplace. This is reflected as back month VIX futures remain bid above the index cash level.