Odds and Sods
Friday is always a good time to do some housekeeping, so here are some updates to recent themes in the blog:
In terms of fear, yesterday showed a fair amount of it, as the 25.3% increase in the VIX is about twice the median for a 2.6% drop in the SPX. While today’s markets seem to have settled down a little after an exciting opening, the elevated fear persists. For those who may be interested, you can always eyeball today’s VIX and SPX percentage changes on my fear-complacency graph to make your own assessment.
Now that the Fed may be done cutting rates for the moment (see Mike Shedlock, “Is it Two and Done?”), the good-news-is-good-news-and-bad-news-is-good-news cycle may be coming to an end as well. This means we are likely entering a Rorschach cycle, where interpretations of government data start to be largely driven by your view of the investing landscape, in addition to any psychotic disorders that may be lurking just below the surface.
In the four generals, four horsemen, etc. category, the large cap tech leaders continue to do well, while Southern Copper (PCU) has struggled a bit. The big story in the group, however, is MasterCard (MA), which saw its stock surge 20% after a blowout earnings report. Much of MasterCard’s success can be attributed to increased acceptance of plastic across the globe, rather than in the
Some quick takes for the VIXophile crowd:
- Ian Woodward notes a fifth Hindenburg Omen signal
- Brett Steenbarger at TraderFeed has some of interesting thoughts about volatility: how VIX spikes can help market timing; and what it means for position sizing
- Mike at HEDGEfolios.com has some compelling thoughts about the Fed and commercial banks in a post-Glass-Steagall world
- Doug Kass predicts that the worst is yet to come in terms of write downs at financial institutions; meanwhile, per Greg Newton at Naked Shorts, Merrill Lynch has tried to park some of its liabilities off the balance sheet for a year
- Bespoke has a great visual comparison of the
- Finally, PC Magazine has a very positive review of the new $400 ASUS Eee PC 4G laptop
2 comments:
Hi Bill,
Do you think last weeks volatility also involved sector rotation? Did you see a large shift from one sector to another?
Thanks
I'm not sure how much sector rotation necessarily impacts volatility. Some of the major sector trends from the past week were more a continuation of existing trends than the beginning of new ones (money flowing into technology and gold and out of financials and consumer discretionary, for instance)...but you raise an interesting question that I will definitely look at soon: does increased volatility in the financial sector presage anything over and above volatility of the markets in general.
If it were the case that increased volatility in the financial sector (and corresponding rotation of money out of that sector into other sectors) turns out to have some predictive value, my hunch is that this would likely be the result of a third cause that simultaneously affects both volatility and sector rotation, so volatility and sector rotation would both be symptoms of a different issue (i.e., concerns about the stability of the financial system as a whole) than necessarily one causing the other.
An interesting question that will give me a number of things to chew on.
Cheers,
-Bill
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