Oil beginning to threaten SIFs
- Thread starter nitro
- Start date
The action in the VIX the last two is very strange to say the least. Normally, with this change in sentiment fron bullish to bearish, one would expect the value of puts to rise (the well known negative correlation of vol to index values falling). That does not appear to be the case.
This leads me to some possible conjectures:
1) The big players anticipated this far earlier and have done most if not all of the protective put buying.
2) Options expiration is obscuring supply and demand, and next week tuesday (or perhaps even tomorrow) puts IV will start to rise with index selling off.
3) Options are affected by interest rates. It is possible that with the FED becoming dovish, the value of calls has also come down, and the RRs are not being put on.
The list of explanations is potentially endless. The only thing starring us in the face is a strange VIX. If it were not for this, I would have turned bearish yesterday on a close and then clear penetration of 1375 SPX. I wait till Tuesday of next week, but this looks like the nail in the coffin.
nitro
This leads me to some possible conjectures:
1) The big players anticipated this far earlier and have done most if not all of the protective put buying.
2) Options expiration is obscuring supply and demand, and next week tuesday (or perhaps even tomorrow) puts IV will start to rise with index selling off.
3) Options are affected by interest rates. It is possible that with the FED becoming dovish, the value of calls has also come down, and the RRs are not being put on.
The list of explanations is potentially endless. The only thing starring us in the face is a strange VIX. If it were not for this, I would have turned bearish yesterday on a close and then clear penetration of 1375 SPX. I wait till Tuesday of next week, but this looks like the nail in the coffin.
nitro
If you are still a bull, you need your head examined. (Remember, this is all in the intermediate term. Long term, the markets are going to levels many many times higher than this. In 30 years, people will be laughing at 1500 SPX and since no one knows where the bottom is, that is why long term investors have to nibble long with tiny shares at good companies, at any price.)
Now the question is where does SPX land. Fib analysis helps. 38% and 50% and 62% retracements from the high are standard. I am looking at 1200 - 1250 SPX, maybe 1275 if we get some luck. Then we see. For example:
http://www.investopedia.com/ask/answers/05/FibonacciRetracement.asp
Remember, there are going to be explosive rallies to the upside, but they will be sold into. In order to get me back interested long, I have to see a close and a defense above 1420 SPX. Then I need to see a new all time high.
nitro
Now the question is where does SPX land. Fib analysis helps. 38% and 50% and 62% retracements from the high are standard. I am looking at 1200 - 1250 SPX, maybe 1275 if we get some luck. Then we see. For example:
http://www.investopedia.com/ask/answers/05/FibonacciRetracement.asp
Remember, there are going to be explosive rallies to the upside, but they will be sold into. In order to get me back interested long, I have to see a close and a defense above 1420 SPX. Then I need to see a new all time high.
nitro
!!!Yikes!!!! :eek:
SIFs soowned hard in the overnight markets. I don't ever recall seeing an overnight session like this.
I don't know, this seems like capitulation by foreign investors to me. Now we need something similar on home base. Get ready to buy, at least for a bounce, during our RTH. For people that don't trade for a living, just put in limit orders of tiny shares on good companies, say $5 to $7 lower from their close on Friday. Be careful on high priced stocks like IBM, those get hit the hardest, so on that one maybe $9 - $12. On tech stocks, be even more conservative, say $10 - $12 (or more on the high priced tech like GOOG, that one could easily lose $100) from their close on Friday. Don't forget preferreds.
nitro
SIFs soowned hard in the overnight markets. I don't ever recall seeing an overnight session like this.
I don't know, this seems like capitulation by foreign investors to me. Now we need something similar on home base. Get ready to buy, at least for a bounce, during our RTH. For people that don't trade for a living, just put in limit orders of tiny shares on good companies, say $5 to $7 lower from their close on Friday. Be careful on high priced stocks like IBM, those get hit the hardest, so on that one maybe $9 - $12. On tech stocks, be even more conservative, say $10 - $12 (or more on the high priced tech like GOOG, that one could easily lose $100) from their close on Friday. Don't forget preferreds.
nitro
Someone PM'd me and asked why, if I am always talking about SPX, do I constantly mention Stock Index Futures?
The reason is this. Despite what anyone in NY tells you about the tail waggin the dog, the futures are by far the most important instruments to watch, not just before the markets open, but all the time. The reason is clear: when insitutions want to move large amounts of money, futures are the most efficient way to do it, period. For example, during the '87 crash, you always hear that the DOW was down 20%. But very few people know that the SP futures at the MERC were down close to 30 friggin % !!!!
That said, here is why I base all my analysis on the SPX. The futures expire every three months. Because of their time value, when one expires and the far out month becomes the front month, there is a gap in the futures charts, even though there may be no market movement. In order to keep the chart analysis smooth month after month, year after year, I just use SPX.
nitro
The reason is this. Despite what anyone in NY tells you about the tail waggin the dog, the futures are by far the most important instruments to watch, not just before the markets open, but all the time. The reason is clear: when insitutions want to move large amounts of money, futures are the most efficient way to do it, period. For example, during the '87 crash, you always hear that the DOW was down 20%. But very few people know that the SP futures at the MERC were down close to 30 friggin % !!!!
That said, here is why I base all my analysis on the SPX. The futures expire every three months. Because of their time value, when one expires and the far out month becomes the front month, there is a gap in the futures charts, even though there may be no market movement. In order to keep the chart analysis smooth month after month, year after year, I just use SPX.
nitro
Man,
This gets uglier by the minute. Obviously we need to abstain from hyperbole until the US institutions wake up and react to the tremor that has hit world markets. I would not be surprised if we open 700 lower on YM, - 75 on ES, NQ -125 and ER2 -45, QM -$5, YG -$75. I am not sure, but there may be a maximum move for the overnight session. I see no bids ES and NQ. Not sure if that is my feed, or no one wants to get in front of the train.
FFFs will go to 100% chance of a .75 basis cut tomorrow for the 30th FR meeting, and I would not be surprised to see an emergency FED meeting to cut .50 sometime tomorrow near the open of the RTH session, depending on whether markets stabilize or not.
Who can sleep with this event unfolding? Or maybe I had too much dark chocolate...
nitro
This gets uglier by the minute. Obviously we need to abstain from hyperbole until the US institutions wake up and react to the tremor that has hit world markets. I would not be surprised if we open 700 lower on YM, - 75 on ES, NQ -125 and ER2 -45, QM -$5, YG -$75. I am not sure, but there may be a maximum move for the overnight session. I see no bids ES and NQ. Not sure if that is my feed, or no one wants to get in front of the train.
FFFs will go to 100% chance of a .75 basis cut tomorrow for the 30th FR meeting, and I would not be surprised to see an emergency FED meeting to cut .50 sometime tomorrow near the open of the RTH session, depending on whether markets stabilize or not.
Who can sleep with this event unfolding? Or maybe I had too much dark chocolate...
nitro
Yep,
Looks like we are locked limit for the overnight session:
http://www.cmegroup.com/trading/equity-index/files/EquityIndexPriceLimitGuide.pdf
I have never seen that.
nitro :eek:
Looks like we are locked limit for the overnight session:
http://www.cmegroup.com/trading/equity-index/files/EquityIndexPriceLimitGuide.pdf
I have never seen that.
nitro :eek: