• Tag Archives VIX
  • “From Nukes To Terrorism”: Battered Investors Flee Risk For Safety Of C And Gold

    The global risk-off mood accelerated overnight on Trump “stability concerns”, coupled with fallout from the Spain terrorist attack and lingering North Korea tensions, even if the VIX is off its latest highs, trading just above 15. Investors fled into German and U. S. Treasury bonds and bought gold for the third day in a row, as the appeal of such top-notch assets grew further due to a deadly attack that killed at least 13 people in Barcelona.
    “In a week where we started by worrying about nuclear war, markets have quickly moved on from this, with yesterday’s weak session more of a response to fears that Mr Trump’s strategy for the economy and business is falling apart and later the terrible terrorist attack in Barcelona,” is how DB’s Jim Reid summarized the week’s psychedelic events.
    Concerns that Trump’s stimulus is in peril spiked following speculation that his top economic advisor, former Goldman COO Gary Cohn, was set to resign roiled markets on Thursday until reports that he’d opted to stay on board steadied the ship, however heightened terror fears added to the risk off sentiment after at least 13 people died when a van plowed into pedestrians in Barcelona. The terror attack was a reminder of lingering geopolitical risks, with nerves still raw after last week’s escalation of tensions on the Korean peninsula.

    This post was published at Zero Hedge on Aug 18, 2017.

  • “Friends Don’t Let Friends Buy VIX”

    I would NOT be selling volatility here. My title was dripping with sarcasm…
    Selling Volatility Is Very Crowded and Dangerous Now
    You know a trade is getting crowded when my parents start asking about it. You know just how one sided something is when people think that even Chuck Norris can’t make money buying vol.
    Last Week’s Spike in VIX has brought out nothing but sellers of volatility. I think selling VIX is very crowded and fraught with danger.
    SVXY Shares Outstanding

    This post was published at Zero Hedge on Aug 17, 2017.

  • VIX Tops 15, Stocks Hit “Fire & Fury” Lows As Cohn Doubts Continue

    Amended statements from The White House have left investors doubting whether Gary Cohn will “remain” at The White House and that has sent stocks plunging to “Fire & Fury” lows and VIX back above 15…

    This post was published at Zero Hedge by Tyler Durden Aug 17, 2017.

  • S&P Futures, Euro, Stocks Fall After Fed’s Low Inflation Warning

    S&P futures, European stocks and bond yields all fell in early trade alongside oil and the euro after the latest Fed minutes expressed concern over weak U. S. inflation, while Asian equities rose overnight ahead of WalMart earnings and the latest ECB minutes. Gold rose as high as $1,290 before fading most gains as the USDJPY rebounded. Fund futures are now pricing in about a 40% chance the Fed will raise rates by December, compared to 50% before the Fed’s minutes.
    Last week’s market turmoil and resultant near record jump in volatility in the wake of heightened tensions between the U. S. and North Korea has continued to ease, bringing down gauges of equity and bond volatility and repairing most of the damage done to stock markets, in fact as Bank of America showed, the retracement in the VIX on Monday was among the fastest on record.

    This post was published at Zero Hedge on Aug 17, 2017.

  • VIX Tumbles, Global Stocks And Dollar Rally As Korea Tensions Ease

    Overnight bulletin summary
    Global equities trade higher amid easing geopolitical tensions Pound tumbles on weaker than expected inflation data Today’s calendar includes US retail sales, Empire Fed, import prices, NAHB, and API crude oil inventories Global stocks and US futures are up for a second day, with the VIX sliding 0.65 vols to 11.68 (-5.2%) and haven assets dropping, after a KCNA report report suggested North Korea had pulled back its threat to attack Guam after days of increasingly bellicose “fire and fury” rhetoric with President Trump, and hours after China took its toughest steps to support U. N. sanctions against Pyongyang, while the possibility of a Sino-American trade war was played down. The report, from KCNA on Tuesday, said Kim praised the military for drawing up a ‘careful plan’ to fire missiles toward Guam. Kim was cited by KCNA saying he would watch the U. S.’s conduct ‘a little more.’
    “There is a more relaxed attitude being taken towards the Korean situation in markets. With the report North Korea has put its plans on hold, there is a sense of stepping back from the brink,” Rabobank analyst Lyn Graham-Taylor said.

    This post was published at Zero Hedge on Aug 15, 2017.

  • JPMorgan Lists Four “Red Flags” Why It Is Starting To Sell Stocks

    While most banks have in recent weeks expressed concerns about the recent, near record high levels in the S&P – which is now 67 points above Goldman’s year end price target of 2,400 – few have been willing to go out on a limb and announce they are short the market, and that the bull market is now over (unlike Gartman who on Friday staked his reputation that the “Bull market has come to an end” only to unleash another rally in the S&P in the next two days).
    Overnight, JPM’s Misla Matejka has done just that, and in his latest equity strategy note writes that JPM “continues to see the risk-reward for equities as unattractive” for 4 main reasons: i) complacency seen in VIX and in HY spreads could unwind further, ii) EPS momentum is deteriorating, iii) valuations are “outright expensive”, and iv) liquidity will be turning.
    If the JPM strategist had left it at that, it would have been notable as it would be one of the very few, unhedged bearish recos on Wall Street. He did not, however, and said that after the early periof of turbulence, markets will continue rising, effectively nullifying his warning because what’s the point of selling just to have to buy again a few weeks or months down the line, or as Matejka put it the “medium-term fundamental view remains that equities are in an upcycle and that the potential consolidation should be used as another good entry point.”

    This post was published at Zero Hedge on Aug 14, 2017.

  • US Stock Buybacks In Biggest Slide Since The Financial Crisis

    In light of today’s euphoric market reaction, which has seen the VIX plunge by over 3 vols, or 20% lower, to just over 12 and sent both the Nasdaq and S&P higher by 1% on relief that there were no mushroom clouds of the weekend, the jury is out whether last week’s sharp risk off, short-vol mauling will persist or be just another BTFD opportunity. But while last week’s tension may already be forgotten, some disturbing trends persist. As SocGen’s Andrew Lapthorne writes, while the S&P trades near all time highs, the smaller cap Russell 2000 dropped a much sharper 2.7%, leaving this index up just 1.3% for the year and down 5% over the last couple of weeks on what we discussed last week was a growing concern for the US economy and companies who do not have exposure to international revenue.
    Furthermore, High Yield Credit also fell sharply. Along with the Russell 2000, HYG has also unwound most of this year’s positive performance in a matter of weeks. As Lapthorne writes, “in our view, high yield credit and the Russell 2000 are all the same trade with different wrappers. Their continued success is highly dependent on asset volatility remaining as subdued and debt markets as generous as they have been, both of which we think is highly unlikely.”

    This post was published at Zero Hedge on Aug 14, 2017.

  • Wars and Rumors of Wars: Fire and Fury Signifying Nothing? Stock market caught in the crossfire

    August is a sultry month for stocks as markets thin out during the dog days of summer. Everyone leaves investing for a break from the heat. Statistically, August is the worst month for overall stock performance, while September delivers more of whatever August sends its way or brings its own dark surprises. After that, October loves a surprise and is the worst for having the most major crashes.
    As markets now slide into their toughest time of the year, they also also face a major war of words that may quickly become more than words. The days of market calm appear now to have ended. $500 billion worth of supposed US market ‘value’ just cascaded into oblivion last week. (Over a trillion worldwide. Of course, it could reappear tomorrow.)
    Markets crawling under the clouds of war
    One place where August is living up to its reputation is in volatility. August is usually the most volatile month of the year.
    The US stock market’s volatility index (VIX) became eerily placid for many weeks this summer, but this past week the VIX rose 70%. Of course 70% from a position so small and calm is not a lot, but it’s an awakening. And there appear to be many people and institutions now awakening.
    PIMCO, as one big example, began loading up on puts to hedge against a market plunge while building up a strong cash position, suspecting the highly unusual calm is the kind that comes before a big storm. PIMCO’s chief investment officer said that Pimco ‘has been taking profits [a nice way to say selling off its stock holdings] in high-valued corporate credits and built cash balances for when better opportunities arise.’ That’s also a cautious way of saying,

    This post was published at GoldSeek on 14 August 2017.

  • “This Has Never Happened Before”: Goldman Warns Low-Vol Regime Is In Jeopardy

    Picking up on something we first noted over a month ago, and following last week’s VIX fireworks, this morning Goldman’s Ian Wright looks at the rapid changes in the volatility landscape – beyond just last Thursday’s near historic surge in the VIX which shot up from single digits to over 17 in 48 hours – and points out something that has never been observed before: the ratio of VVIX to VIX, or the vol of vol relative to implied volatility as per the VIX, just hit the highest level on record, while the VVIX itself spiked to the highest level since the August 2015 ETFlash crash.
    The also confirmed something else we observed in mid-July when we showed that the price of VIX convexity had hit an all time high, when we said that the market has never trusted the VIX as little as it did then.

    This post was published at Zero Hedge on Aug 14, 2017.

  • One Trader’s Reality Check “If You Think Last Week Was A Disaster, You May Be In The Wrong Line Of Work”

    While the moves in equity (VIX) and credit (CDX, ITRX) protection costs last week shocked many out of their recent coma of complacency, former fund manager Richard Breslow warns it was the lack of reaction across markets broadly that investors should be more worried about.
    Via Bloomberg,
    We really need to stop using the expressions ‘risk-on’ and ‘risk-off.’ Or if that’s too much to ask, how about a short holiday while we collect our wits. We grossly over use them to the point of rendering them meaningless and trivial. And reliance on these crutches is just a way of avoiding thinking about what might actually be going on. The markets’ perception and appetite for risk isn’t something that can be measured on an hour by hour basis. A few random basis points isn’t a measure of anything.
    And the reality that markets remain laughably correlated on a short-term basis means they are all just reflecting the same factor signal not giving independent confirmation of where we might be headed.

    This post was published at Zero Hedge on Aug 14, 2017.

  • VIX Tumbles, S&P Futures, Global Stocks Rebound Sharply As Korea Fears Fade

    The VIX tumbled by nearly 3 vols, down to 13.10 last, or over 18% lower and global stocks and S&P futures rebounded sharply on Monday as tensions over an imminent conflict with Pyongyang receded after U. S. officials played down the likelihood of a nuclear conflict with North Korea, recovering from fears of a U. S.-North Korea nuclear standoff drove them to the biggest weekly losses of 2017, while the dollar too rose off four-month lows it had hit against the yen.
    As DB summarizes the latest events in the ongoing N. Korean crisis, this could be a pivotal week in the stand-off as last week Kim Jong-un did say that they would be ready to attack Guam by “mid-August” which if we are being literal is this week. However a lack of much news on the story over the weekend is surely a positive for now. Indeed the CIA’s director Pompeo tried to calm nerves by speaking to Fox news on Sunday, noting that ‘… I’ve seen no intelligence that would indicate that we’re in (the cusp of a nuclear war) today…’ and would not be surprised if NK tested another missile. Further, national security adviser McMaster also said there’s no indication war will break out. Perhaps these comments were a response to Trump’s comments on Friday that ‘military solutions are…locked and loaded, should NK act unwisely…’.
    European shares bounced after falling nearly 3% last week, with the STOXX 600 up 0.7% following on from a 0.9 percent jump in MSCI’s index of Asia-Pacific shares outside Japan. The Stoxx Europe 600 Index headed for its first gain in four days, tracking increases across markets including South Korea. As the chart below shows, Still, Europe may be due for a pullback: the MSCI Europe Index hasn’t had a 10% correction in more than a year.

    This post was published at Zero Hedge on Aug 14, 2017.

  • Shocking Admission From Global Head Of Strategy: “Our Clients Have Given Up On Valuation As A Metric”

    For all the recent concerns about an “imminent” nuclear war with North Korea (not happening, according to the head of the CIA), which prompted a stunned reaction from Morgan Stanley which earlier today observed the “70% rise in the VIX index over three days, 2% drop in global equities, and more than a few holidays disrupted”, leading it to conclude “Well, That Escalated Quickly“, the market continues to ignore the real risk: the upcoming central bank balance sheet taper which will have a dire and drastic impact on markets according to Citi’s global head of credit product strategy, Matt King:
    Markets seem optimistic that central bank plans to modestly reduce their support for markets in coming months can be achieved without disruption. We are not convinced.
    Borrowing an analogy from developmental psychology, King compares the relationship between the Fed and the market to that between a (failed) parent and a child obsessed with their cell phone.
    When other people’s children behave badly, the temptation is to presume it’s something to do with the parents. But then one day, even if you managed to avoid the terrible twos, your very own adolescent comes downstairs to breakfast with a look that could curdle the milk in its carton, fails even to grunt a response to your cheery good morning, and makes straight for their mobile phone. It shortly becomes clear that the mere fact of your breathing is something they find deeply offensive. Nothing in their previous twelve-or-so years of almost uninterrupted sweetness gave any hint of this. Where on earth did you go wrong?

    This post was published at Zero Hedge on Aug 13, 2017.

  • Morgan Stanley: “Well, That Escalated Quickly”

    “Well, that escalated quickly.”
    That’s how Morgan Stanley’s chief cross-asset strategist Andrew Sheets summarizes events in the last week in his latest Sunday Start note, in which he describes how following one of the calmest stretches for stocks since the 1960s, an escalating war of words with North Korea hit late summer markets priced for relatively little vol with the result sharp and sudden: a 70% rise in the VIX index over three days, a 2% drop in global equities, and more than a few holidays disrupted. Fear not, though, because according to Morgan Stanley, whose outlook on the S&P is one of the most bullish on Wall Street, views last week’s events “as a standard equity correction within an ongoing bull market.” With volatility bearing the brunt of the repricing over the last several days, that’s where some of the most interesting changes lie.
    And while Sheets lays out his reasons why the bank’s advice to clients is just to BTFD – or in the context of N. Korea, BTFAONW – Morgan Stanley does caution that things could get serious if the one scenario many – most recently Jeff Gundlach – have been dreading, namely the rise in volatility, becomes self-fulfilling, with investors selling as volatility rises and markets move lower, driving more of both. As Sheets writes, “for this risk, I’d be watching if new lows in the S&P 500 are confirmed by new highs in the VIX. This scenario is also scarier if realised volatility can stay near implied (if it doesn’t, implied volatility can fall, reversing the cycle). As of noon Friday, 3m S&P 500 was priced for a daily move of 0.8% and EuroStoxx was priced for a daily move of 0.9%.”
    Finally, while the bank remains optimistic on equities, it adds that there is an exception: “we would not ‘buy the dip’ in US credit, where [we] see more risks, given weaker fundamentals, expensive pricing and limited upside in exchange for swimming against the recent tide.”

    This post was published at Zero Hedge on Aug 13, 2017.

  • Doug Noland: Doubled-Down

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    ‘The real trouble with this world of ours in not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. Life is not an illogicality; yet it is a trap for logicians. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.’ G. K Chesterton
    The S&P500 rose to a record 2,490.87 during Tuesday’s session at about the same time the VIX was trading down to 9.52. The DJIA reached a record 22,179 during Tuesday trading. At 5,973, the Nasdaq100 (NDX) was on track mid-day Tuesday for a record close. Tuesday saw the bank index (BKX) trade to a five-month high, with the broker/dealers (XBD) just shy of all-time highs.
    ‘North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen. He has been very threatening … and as I said they will be met with fire, fury and, frankly, power, the likes of which this world has never seen before.’

    This post was published at Wall Street Examiner by Doug Noland ‘ August 12, 2017.

  • “You Could See Panic”: PIMCO Joins Gundlach In Loading Up On S&P Puts

    In the world of giant bond funds, imitation of trades just may be the sincerest form of flattery.
    Just two days after DoubleLine’s Jeff Gundlach told Bloomberg and CNBC that he was taking profits in high risk assets, including corporate profits, building a buffer and loading up on VIX as a surge in volatility was his “highest conviction trade” (and correctly so, as just one day later VIX soared from 10 to 17), that “other” bond titan, Pimco said it was doing precisely the same.
    Speaking to Reuters, Pimco’s chief investment officer, Dan Ivascyn, said on Friday that his firm which which oversees more than $1.6 trillion of assets “has built up an above-average cash position firmwide and has held S&P put options as geopolitical and military risks mount.”
    The former should not come as a surprise: three weeks ago we reported that according to Bank of America, the cash allocation among the bank’s high net worth private clients (i.e. rich retail investors) had fallen to the lowest on record as institutions were liquidating stocks to increasingly more euphoria retail investors, which obviously meant that those on the other side of the trade – in this case selling institutions like Pimco – were building up their cash reserves, because contrary to CNBC’s constantly erroneous reporting on the topic for nearly a decade, there is no such thing as “cash on the sidelines” and every time someone buys a stock or any other risk assets, someone else sells it and pockets cash proceeds.

    This post was published at Zero Hedge on Aug 11, 2017.

  • Saxo Hikes Inverse VIX ETF Margins To 40%

    Last Saturday, we reported that with VIX at 9, Interactive Brokers surprised many when announced it would raise volatility margins anticipating a VIX shock. This is what the brokerage said:
    VIX has established new all-time lows over the course of the past month. The price dynamics of that product are such that it can have very large relative price increases over a very short period of time base on news and other market factors. In recognition of the special risk of sudden, large increases in market volatility, that is inherent in Volatility Products such as VIX, Interactive Brokers will put into place greater margin requirements for Volatility Products after expiration processing on Saturday, 19 August. IB was also surprisingly clear in what it anticipated
    IB’s margin policy will be to consider market outcome scenarios under which VIX might rise to a price of 18 (even when it is currently priced much lower) and under which the other Volatility Products could rise to proportionately similar degrees. As we summarized, “In other words, IB is starting to prepare for the day that the VIX doubles from current levels.” Less than a week later, Interactive Brokers was proven right when VIX hit 17, nearly hitting its bogey. We also pointed out something else:
    Of course, since volatility is the “fulcrum security” of today’s reflexive market nature – does a surge in the VIX send stocks lower, or does a market crash lead to a VIX surge? – the very fact that vol-linked leverage is about to be aggressively cut first by one, then by many more if not all exchanges, as we head into the critical for volatility fall period, these warnings could create a self-fulfilling prophecy whereby the margin increases are the very catalyst that leads to a surge in volatility. Whether that is what happens over the next two weeks remains to be seen.

    This post was published at Zero Hedge on Aug 11, 2017.

  • Gartman Stakes His Reputation That “The Bull Market Has Come To An End”

    If the algos were waiting for just one catalyst to unleash the buy everything, sell VIX program, they may have gotten it moments ago when, following a global rout across markets on yet another day of North Korean nuclear war concerns, Dennis Gartman, staking his “reputation” said that he is “fearful… very… that this wondrous bull market that began in the spring of ’09 has come to an end and we do not make this statement lightly for we know the damage that can be done to an already damaged reputation if this statement proves to be wrong.”
    Judging by the spike in futures after today’s 5th consecutive miss in CPI, which paradoxically has now pushed the dollar higher, Gartman’s “reputation” suddenly appears in peril.
    His key thoughts excerpted below:
    There are two questions facing us this morning regarding investment in equities. Firstly, will the ‘Machines’… the algorithmic buyers… trained only to buy weakness step to the fore once again and buy equities with abandon? We must remember that the ‘Machines’ have a very limited memory; they’ve no memory of decades past and of protracted bear markets. Instead, their algorithms tell them to simply buy weakness and this, clearly, is weakness. So shall they? That is THE question.
    Secondly, we wonder if the supposed support for the market here in the US at or near 2435 in the nearby S&P futures… and in the ‘spot’… will hold, for as the chart included at the bottom of p.1 would seem to suggest that support absolutely must hold. As we write, it is and as the day progresses it must.

    This post was published at Zero Hedge on Aug 11, 2017.

  • What’s Next For The VIX? RBC Explains

    Yesterday, as the VIX was setting up for one of its biggest one day jumps in history, we reminded readers just how massive the short-vol overhang was courtesy of the following chart from JPMorgan showing that the net Vega on VIX-related ETFs was at an all time high, suggesting that the risk of a vol-buying feedback loop was significant, because as VIX rose and markets fell, it would prompt more vol-shorters to cover, selling more risk assets in the process, leading to an even higher VIX, and so on.
    So what happens next to the VIX, and the vol-complex in general? Below we share the latest thoughts from RBC’s head of cross-asset strategy, Charlie McElligott, who notes
    WITH THIS MUCH NEGATIVE CONVEXITY FROM A LOW ABSOLUTE LEVEL… IT SURE DIDN’T TAKE MUCH TO ‘SET IT OFF’: So this is awkward: the hedges pushed last week ‘hit’…but with the ‘wrong’ event-risk catalyst.
    Yesterday was pure ‘comeuppance’ for the ‘short vol’ / ‘negative convexity’ crowd, off of the crescendo-ing cacophony of self-fulfilling expectations for a market ‘volatility event.’ I know this sounds ‘chicken or the egg,’ but I truly believe that it was this volatility positioning which was the core of the issue yesterday, and not wholesale buyside de-risking of underlying core portfolio longs as the catalyst.

    This post was published at Zero Hedge on Aug 11, 2017.

  • Why One Trader Thinks Emerging Markets Are About To Get Slammed

    While so far the rout from the North Korea crisis has impacted global volatility first and foremost, with the VIX surging 50% (a rather pointless metric considering where the VIX was just days ago) on a modest drop in the S&P which earlier this week was making new all time highs, as massive short vol positions have been rapidly unwound, one trader believes the next place of impact is the sector which has so far emerged, so to say, largely unscathed from rising risk concerns: emerging markets, the clear outperformer so far in 2017.
    In his latest overnight Macro View, Bloomberg’s Mark Cudmore writes that “Rightly or Wrongly, EM to Bear the Brunt of Selloff”, and considering the overnight plunge in Chinese stocks, which as discussed earlier just suffered their biggest drop of the year led by the commodity sector…

    This post was published at Zero Hedge on Aug 11, 2017.