Condor Options

In a viable, vibrant bull market working alongside a healthy economy, are 400 point rallies like this one really needed?

Volume today? Shrug. Nothing to write home about. Volume in IWM and QQQQ was particularly average; the biggest volume was in the Dow, which, as you may recall, is still composed of just 30 stocks. The biggest Dow gainers today, unsurprisingly, were AIG (+8%) AXP (+7%) C (+11%) and JPM (+9%). As nice as this rally was, only QQQQ is above its February 27th highs, so this thing needs some follow-through if it’s going to be believable.

Are we geniuses for closing a newsletter trade yesterday? Of course not, it’s just a matter of watching your Greeks and taking some delta risk off the table if it starts getting away from you.

The really noteworthy fact today is that the VIX has been absolutely crushed. At 22.68, it’s pushing the bottom of its Bollinger band, and just about any technical indicator you want is giving a buy signal on the VIX here (which is usually a sell signal for equities). Maybe we get some more rally, maybe a nice little push at the open, but we wouldn’t be surprised to see tomorrow give back some of these gains.

We’re not particularly interested, except that a higher open tomorrow will mean it’s time to put on some more calendars. Long calendar spreads = long vega. If you’re not using these as directional trades (we’re not), then it doesn’t matter whether you’re using calls or puts, since put and call calendars are synthetically identical.

Market Voodoo

Someone sent us a prognostication service (ahem, we mean “newsletter”) today which included the following remark:

One interesting cycles fact is that most decennial years ending in an “8″ see their lows before March 31st. So if 2008 is to repeat the pattern, this Bear market is likely over.

Okay, nonsense. If you have to start analyzing the markets in terms of what happened in 1918, you might as well pack it in. Also, why the obfuscatory “decennial”? Are there any decades in which a year ending in 8 doesn’t occur? (”Boy, the 1930s were tough. Remember when we skipped straight from 1937 to 1939?”) Charlatans are a dime a dozen these days. Or, should we say, “are a pecuniary dime a dozen?”

Reversal Readings

Yikes, what a crazy time to start this feature - almost every ETF we track has a reading at or above 95. We’ll just list an interesting sample.

DIA, SPY, QQQQ, IWM - all above 95
EEM - Emerging Markets - 98
EWA - Australia - 96
XLF - Financials - (only) 95
DBC - Commodities - 4.95
GLD - Gold - 0.59
VIX - S&P500 IV - 0.17 (limbo mode)

Again, these are the relative strength index (RSI) readings for the products listed. Typically, a 2-period RSI reading above 95 or below 5 indicates a high probability of a reversal in the following trading session or sessions. Under normal circumstances, we would list any readings above 90 or below 10 for your information.