Tainted Alpha

Interesting action with the VIX yesterday, break out to the 52 weeks low and then rebound to the upside. Looks someone was buying insurance after the run yesterday.

Chart 1. VIX

Looking at the 5 year chart the VIX is still at elevated levels; so if the nirvana continues we could see 1X  levels.

Chart 2. VIX 5Y Chart

We had a nice move to the upside yesterday in equities mostly on JPM earnings. 80% of the companies have reported earnings above consensus; so we could have some further up moves.

Chart 3. S&P 500

The dollar was down; crude oil was up; gold ended lower. Divergence in U.S. dollar commodity hedge. In my view sign of overbought crude oil.

Chart 4. Crude Oil Futures

Chart 5. Gold Futures

Chart 6. U.S. Dollar Index Futures

And on the end one of my favorite potential trades: short long end of treasuries curve is starting to gain momentum. Premature in my view; but it’s a perfect setup; asymmetric outcomea to the down side; I definitely see myself playing that, but contrary to the consensus I see deflationary risks more pronounced than inflationary; for the time being.

Chart 7. U.S. Treasury Bond Price

Crude Oil, Gold, S&P 500, U.S. Dollar, U.S. Treasury Bonds, VIX

This entry was posted on Thursday, October 15th, 2009 at 4:48 am and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.