Skip to main content

Morning Update


Consumer confidence in the Euro area plunged 3.1 to -24.6, the steepest decline in three years. Consumer confidence has only been lower than current levels three times in the past 30 years. Germans were the most confident (or rather least unconfident), while Greeks “are urgently trying to find new reasons to keep pushing the rock uphill day after day” (ZeroHedge).


US jobless claims were up to 374K versus 372 prior and 370K expected. Yesterday’s Beige book showed most districts “growing gradually”, retail sales increasing, and stable prices for finished goods. This is all good news, except for traders betting on the Fed announcing a new round of easing. The market was little changed by the news as it looks to Bernanke’s speech tomorrow.

The S&P 500 has only changed more than 0.25% 4 of the last 16 days, while during the same period the VIX has inched up from a low of 13.28 to 17.06. Implied volatilities premium to realized volatility continues to grow and is exceptionally high by historical standards.

Comments

Post a Comment

Popular posts from this blog

Morning Update

ECB officials said last night that ECB President Mario Draghi will likely wait to hear Germany’s Constitutional Court’s ruling on the EFSM before publicly unveiling his plans. Many were hoping Draghi would unveil his plan after the ECB’s September 6th meeting, but this is becoming increasingly unlikely. Today Reuters is reporting that Germany is the latest European nation to begin studying the possible impact of a Greek exit from the Euro. This comes ahead of Chancellor Merkel’s meeting with Greece’s Prime Minister today. Merkel has repeatedly said that she would like Greece to remain in the common currency, though clearly someone in Germany believes a Greek exit is possible outcome worth preparing for. This morning US new durable goods orders numbers we released for July, coming in at a gain of 4.2% M/M. Though this was strong than expected, it was primarily driven by strong aircraft sales. Non-defense orders excluding aircraft were down a sharp 3.4% M/M versus a 0.2% decline expecte...
Post a Comment
Read more

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