Wednesday, January 9, 2013

Shallow Dip

The past two days we've had minor selling and it looks like we've shaken out some weak hands. With the fiscal cliff behind us, the new year, and funds looking to allocate more to stocks, you have an underlying bid that will last until the funds are done allocating. I don't think they are done seeing how dry this market trades. We should keep grinding in low volatility trade and eventually work our way to ES 1470. There is a belief that the VIX is low and put options are cheap right now, having heard this a few times on CNBC. Well, when the market trades in 8 point ranges, day after day, do you expect the VIX to hold up? I would have to say VIX is still a bit too high considering the lack of volatility post fiscal cliff. Sure, the debt ceiling will increase volatility, but probably not by much. The debt ceiling is such an artificial crisis with an obvious ending that I can't imagine anyone with serious money being truly scared of that event. And with earnings, the game is so rigged with such a low bar to jump over and with the Hurricane Sandy excuse that it should be uneventful.


TGE said...

If that's the case, what's keeping us from going to 1500 and beyond ?

Market Owl said...

Lack of earnings growth. But with Fed easy money gravy train, you can't stay down for long. Expect lower volatility this year, probably range bound between 1360 to 1520 for most of the year, hanging out mostly between 1420 and 1480.