THE DOT - if this turns orange or red be alert

Monday, February 28, 2011

brainstorming Monday

1. Was a bit premature to say that the uptrend was broken for the SPX as we challenged it for 2 days but managed to turn around at the 1300 support. Well as you will say later today this volatile top is going t be a little more tricky as Apple messes around again to the upside with IPAD 2 being announced on Wednesday - it closed the gap and trades above 350 again. Where is a chance for new highs in case of Apple anyway even the Tech indices may make minor new highs this week - more on that ay the index updates.

The FED creates the ultimate bubble and if they do not follow up with QE3 markets will crash anyway but even if they come with another round if inflating markets a Dollar crash might harm stocks as well as the FED digs America into its own grave and another round of Ponzi scam might be to much of poison. Right now they seem to have succeeded anyway as retail rushes in to buy all those bubbly stocks and the rate of change for Apple products will not produce more buyers as no one can refresh his gadget on a yearly basis but Apple can still steal a bit more from classic PC consumers but that is already priced in around 360.


Blank Image
MONDAY, FEBRUARY 28, 2011Blank Image
High bullish readings in the Consensus stock index or in the Market Vane stock index usually are signs of Market tops; low ones, market bottoms.
Last Week2 Weeks Ago.3 Weeks Ago
Consensus Index
Consensus Bullish Sentiment75%74%71%
Source: Consensus Inc., P.O. Box 520526,Independence, Mo.
Historical data available at             (800) 383-1441      .
AAII Index
Source: American Association of Individual Investors,
625 N. Michigan Ave., Chicago, Ill. 60611 (312) 280-0170.
Market Vane
Bullish Consensus64%67%67%
Source: Market Vane, P.O. Box 90490,
Pasadena, CA 91109 (626) 395-7436.
FC Market Sentiment
Source: First Coverage 260 Franklin St., Suite 900
Boston, MA 02110-3112             (617) 303-0180      .
FC Market Sentiment is a proprietary indicator derived from actionable sell-side trade ideas sent by the sell-side to their buy-side clients over the First Coverage platform. Over 1,000 institutional sales people at more than 250 firms participate on the First Coverage platform and have contributed hundreds of thousands of ideas since inception. Each Idea is associated with a ticker or sector and is tagged bullish or bearish by the creator. This data is aggregated at the sector, industry and market level. The FC Market Sentiment score ranges from 0-100 (0=most bearish, 50=neutral, and 100=most bullish) and represents a completely objective, real-time view into what advice the sell-side is providing to their buy-side clients

Citigroup Panic/Euphoria Model
Market Sentiment
2. Besides volatility with now get SKEW from the CBOE which is a very good indicator combined with VIX.
We have now reached the same setup as in late April 2010 before the Flash Crash and correction.

It's A Skewed, Skewed World

Tyler Durden's picture

From Credit Trader
CBOEs recent introduction of the SKEW Index brings the realities of the options market (and real fear indexes) to retail investor's eyes. With so much attention paid to the VIX (the anachronsitic FEAR index) and especially its dropping over the last few months, investors are led to believe that risk is reducing but lo and behold, as many Pros know, the cost of protecting against a much more serious drop (or tail event) has increased quite notably with out-of-the-money options vols rising notably. The chart below shows this quite clearly as VIX (At-the-money vol) ebbs away (red arrows) as the day-to-day vol of more 'normal' mark-to-market movements is culled thanks to the liquidity fueled effervescence, the rise in out of the money (or crisis/event risk) vol has risen dramatically (white arrows). This can only go on so long as vol arbitrageurs will creep up the moneyness curve (to hedge the tail risk) and eventually impact the ATM. This happened in early 2010 and is happening again currently.
The recent moves in the major credit indices also fits with this world view as any smarter-than-the-average bear capital structure arbitrageur knows that the skew (and specifically the out of the money vol market) has a much better relationship with credit than the near-the-money. One other potential way to think of this (hattip to Artemis recent article on this) is that the skew better represents the real market value of the Bernanke Put (i.e. how much is the market pricing in the never-ending story of a Fed-provided safety net) - perhaps notable that the SKEW began to rise very shortly after Jackson Hole and the QE2 plan came online.

No comments:

About Me

I am a professional independent trader