Skip to main content

Popular posts from this blog

Is the KCJ Foreshadowing a 2008 Repeat?

The CBOE Correlation Index (KCJ) is close to the lowest level we have seen since it was first listed in 2007. The KCJ measures the implied movement of the S&P 500 components options, compared to the implied movement of the S&P 500 index options. Simply put, the higher the number, the more likely all stocks are going to move together. Conversely, a low number will be characterized by sector rotation, and flat markets; one sector moves higher, another moves lower.  (Source: Access Hollywood) Correlation, for lack of a better term, is correlated with volatility. Not surprisingly, 30-day S&P 500 historical volatility is near the low level of 6.5%. Currently at 33.5, KCJ is sitting close to rock bottom, lower than where it was in 2007, (but not lower than where Lindsay Lohan was in 2007).  So far this year, the market has been able to grind higher, characterized by leadership in FANG(Facebook Apple/Amazon, Netflix, Google) and sector rotation. A...
Post a Comment
Read more

Morning Update

Last night rumors that a Spanish bailout would occur in the near future strengthened, tightening Spanish and Italian bond yields to bunds. Even after the rumors that Spain would seek a bailout this weekend we denied risk-on sentiment remained. The Euro is now trading near the psychologically important 1.30 level and US equities are pointing towards a higher open. Yesterday the market also looked strong early on but gave back nearly all of its gains by the close. A strong close higher today will take some momentum back from the bears, while another reversal will only encourage more near-term selling. Yesterday we noticed unusual options activity in Best Buy. Someone sold 22,500 BBY Oct. 19 calls for $0.25 and bought 15,000 Nov. 19 calls for $0.90. This trade appears to be someone rolling their long Oct. calls forward into November. The Nov. calls will turn a profit if the stock is above 19.90 at expiration, which would require a 17% move from yesterday’s close. Best Buy has seen de...
Post a Comment
Read more