Volatility Tracker for the week of November 1, 2009
Equity markets have been drunk on the wine of federal stimulus for most of this year. While the increased volatility in the latter half of last week could amount to a mere hiccup in the reflation rally, indicators suggest that more participants are concerned about an equity market “hangover” than at any time since the market bottom. The transition to a different market environment may have just occurred, and in the absence…
Volatility Tracker for the week of October 26, 2009
As I’ve noted on many occasions here, the relationship between spot VIX and longer-dated VIX estimates has not “worked” as a directional indicator for at least several months. [7,8] This looks like a genuine puzzle: the premium VIX futures traders are willing to pay and/or requiring in order to sell is too steep and has been too persistent to be dismissed as a phenomenon typical of the “wall of worry” that bull…
For several weeks now in our Volatility Tracker we’ve noted the persistence of a premium in longer-dated VIX futures versus the front-month contract and especially the spot VIX. Historically, divergences like these have resolved in favor of the futures price rather than the spot VIX price, which has tended to correlate with a decline in the S&P 500.
Clearly, those tendencies haven’t held up in this case. The market has rallied relentlessly, VIX has continued its steady decline, and the relative premium…
Volatility Tracker for July 20, 2009
Equities had a strong week, but the view from the volatility front is not so clear – if anything, it favors caution rather than optimism. Volatility futures declined this week in absolute terms, but their term structures only steepened and have not changed their basic shape for several weeks now. [7] The VIX Premium Ratio has made another new high for the year. [8] Neither of these indicators are unqualifiedly bearish, but expectations of higher…
Volatility Tracker for June 8, 2009
This week may be a turning point. None of the indicators below are quite at extremes, and I am keeping my S&P volatility bias at neutral since I would rather be a little late than very early. However, notice that volatility sellers have been “right” since at least mid-April, [5] a trend which is far more likely to reverse sharply than to flatten out. The S&P 500 looks overbought on a price basis, [4] especially…
Monday, November 2, 2009
2 Comments