Wednesday, August 3, 2011
VIX Down
There is complacency in this market, and the VIX being down from 24.79 to 24 even though the market is even lower shows that traders are not very willing to buy put protection. Anecdotally, there are a lot of people looking to buy this dip, including those on CNBC. I continue to stress that one has to be very cautious buying stocks here. I think we go to SPX 1220 soon. And I don't think we see much of a bounce before we get there.
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4 comments:
Typically on the second leg down, i.e. 1220 vol will not go higher than the first leg down i.e. this one from the last eight sessions. So I wouldn't pay much attention to vol, infact you could short VXX and the market. I also like to short VXX here to short the vol in my puts.
Admittedly the general market feeling here is not good -- it does not feel like a dip to be buying. But one point to ponder: earnings have been overall good, for some companies very good, e.g. INTC reporting its best quarter ever. Normally the market does not have a great memory, so once this debt boogie man is in the rear window it could be that earnings will prop the market up, assuming guidance is at least decent.
Europe is a complete mess and ISM printed the lowest number in over 2 years. Economy is slowing down big time, and without fiscal or monetary stimulus, you are banking on the economy to be self sustaining and that's making a big bet, considering that China is about to make a hard landing and Europe will remain moribund. And Brent crude is still at $113, so no real relief for consumers there.
Lastly, sentiment is just not that bearish, which is a big warning sign when the price action is this weak.
49.9% bearish now, getting there.
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