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Showing posts from 2017

Fed Sleight of Hand

“What the eyes see and the ears hear, the mind believes.”  Harry Houdini
Today is the day volatility traders have been eagerly waiting for, that is of course Fed Day!  And it is not just any Fed Day, it is the most important Fed meeting since the last Fed meeting.  That is of course hyperbole, and if there is one thing financial news loves, it’s exactly that.   The Fed is overwhelmingly expected to raise rates, but every time we have the most important Fed meeting since the last Fed meeting, we need to remember the Fed mission.  The Federal Reserve Mission is to promote maximum employment while at the same time keeping prices stable.   In laymen’s terms, high jobs and low inflation.   Those two goals are of course at odds with each other-- as the economy heats up, so will inflation.  So how does the Fed achieve its mission on a day where rates are expected to rise?  They act like a parent who went to Phish concerts in college and tells their children not to do drugs.  Yes, the Fed wil…

Gold and Treasuries Say “RISK OFF”, But VIX Says "RISK ON"

Today we are seeing a modest rebound in the market after yesterday’s small selloff.  Volatility remains extremely low, with the VIX hovering around 10.  It’s important for traders to recognize how low the VIX has been lately.  Since 2010, the VIX has only closed below 10 five times, and each of those five times has come in the last month.                   However, the market is not without risks right now.  Gold has rallied 6.5% since May 9th.  Treasuries have rallied, pushing rates to below 2.15.  So, the market is currently in a risk off mode while equities are in a period of historically low risk.  The VVIX (the VIX of the VIX), for its part, is not sounding the all clear signal, 87 is in the medium range for VIX volatility.  Tomorrow we have a potential market moving event with James Comey’s testimony to Congress.  The last time Comey’s name was in the news, we saw the VIX move from 10.5 to over 15 in one trading day (a 50% increase) on a day where the market was down over 2%.  …