Send In The Clowns
Send In The Clowns
To nobody’s surprise the FOMC as well as the Reserve Bank of Australia stepped in on Tuesday, cutting policy rates by 25bps and 50bps respectively in a desperate effort to save global equity markets from implosion. Allegedly the Bank of Canada is expected to follow suit today with its own 50bps cut. Suspiciously missing from the rate cut party was the ECB which thus far has opted against a coordinated move with the Fed and has signaled that it intends to move the market with words rather than action.
Good luck with that. Perhaps Christine Lagarde and her intrepid crew of economic wizards, most of whom are not exactly known to be big fans of Donald J. Trump, intend to ‘wait and see’ until the SPX has finally corrected back down to March 2009 levels before stepping in.
Or perhaps it’s the inconvenient fact that the ECB is increasingly running out of firepower and is therefore reserving its measly 10 or 20bps rate cut for when the excrement is about to hit the proverbial fan over in Europe.
Deutsche Bank has been on a slow death march over the past decade, but there are still $8 worth of downside to squeeze out of that one and many many other under capitalized European banks. Tic toc – tic toc…
In any case, I am somewhat facetious in that the largest coordinated measure by central banks thus far has only resulted in a lackluster response. As you may recall I am still holding a small long position but the odds of success are rapidly diminishing with every failure to clear the first hurdle in its way.
At this stage we remain stuck in a strange high volatility place, unable to clear the above the psychologically important 50% retracement mark.
The good news is that the SPX appears to have observed the 100-week/50-month SMA combo I’ve had my eye on. The bad news is that a breach below that would most likely unleash pandemonium.
What’s even worse is that option traders are STILL under estimating our new volatile reality for the foreseeable future. At the end of last week annualized IV came out to around 103 handles up or down on the SPX.
Well guess what – we already breached that by over 70% and then slipped right back lower. Which pretty much guarantees high option premiums for quite some time to come.
More market insights for my intrepid subs below the fold:
It's not too late - learn how to consistently trade without worrying about the news, the clickbait, the daily drama and misinformation. If you are interested in becoming a subscriber then don't waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.
Please login or subscribe here to see the remainder of this post.
