Add in the currency disruptions and it's tough to call the short term in the commodity markets, IMO. Hard to say for this observer, especially as it relates to gold.
Just saw this article on volatility, so I figured I drop it on this thread for reference.....
A Tale Of Two VIX Signals - Chris Dieterich
The CBOE Volatility Index often looks like a big-time contrarian indicator.
But what to make of two conflicting signals from the so-called “fear gauge”?
 Associated PressInvestors are positioning for a storm in the stock market using options on the CBOE Volatility Index.
The VIX dropped 7% to 12.5 in recent trading, once again near its floor for 2015. The measure’s long-term average is closer to 20, but it hasn’t spent time at those heights since January — and only then briefly.
Yet the alert is sounding in more complex reading on fear: So-called skew of options on VIX futures ended last week at the highest in nine years, Bloomberg reports.
Sounds pretty wonky, I know. Skew just means the price of bullish options relative to bearish ones. Callie Bost at Bloomberg says that “options betting on a 10 percent rise in the VIX cost 19.1 points more than puts with strike prices 10 percent below the VIX’s level.” She’s looking at three-month data.
A low VIX at the same time that VIX options are pricey isn’t as befuddling as it seems. The stock market has been pretty flat all year long (hence low VIX) but lots of investors are increasingly worried about a tumble (hence pricey VIX options).
The market’s “fear gauge” is an options-based measure of the price for protective options in the SPDR S&P 500 ( SPY). When market fear is high, traders crowd into protective puts and the VIX shoots higher as stocks fall. When fear is low, VIX plumbs new lows. (Traders don’t use the oft-quoted VIX for trading purposes; instead, they must target VIX futures, the exchange-traded funds that own them and options.)
So what’s the actionable signal amid this noise? JonesTrading’s ETF specialist, David Lutz, notes this morning that the last time that bearish VIX options were as pricey relative to calls, in 2006, the S&P 500 jumped 25% before the market peaked, in 2007.
Exchange-traded products tied to volatility futures have been beaten up over the long term, as usual, a sign of persistently low volatility. The iPath S&P 500 VIX Short-Term Futures ETN ( VXX) is down 21% over the past month; the geared ProShares Ultra VIX Short- Term Futures ETF ( UVXY) and VelocityShares Daily 2x VIX Short Term ETN ( TVIX) are each down about 37% over the same period.
If you see the fact that big institutions are positioning for a tumble as a contrarian, bullish signal, then the VelocityShares Daily Inverse VIX Short-Term exchange-traded note ( XIV) is still your play.
Separately, but related: Barron’s options guru Steven Sears notes that CBOE Holdings ( CBOE) is going to list weekly options on the fear gauge, in additional to those that expire each month. |
