Timing & trends

An Impending Economic And Financial Disaster

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Posted by Dave Kranzler - Investment Research Dynamics

on Monday, 15 May 2017 07:27


You’ve probably heard/read a lot lately about the VIX index. The VIX index is a measure of the implied volatility of S&P 500 index options. The VIX is popularly known as a market “fear” index. The concept underlying the VIX is that it measures the theoretical expected annualized change in the S&P 500 over the next year. It’s measured in percentage terms. A VIX reading of 10 would imply an expectation that the S&P 500 could move up or down 10% or less over the next year with a 68% degree of probability. The calculation for the VIX is complicated but it basically “extracts” the implied volatility from all out of the money current-month and next month put and call options on the SPX.

The graph above plots the S&P 500 (candles) vs. the VIX (blue line) on a monthly basis going back to 2001. As you can see, the last time the VIX trended sideways around the 11 level was from 2005 to early 2007. On Monday (May 8) the VIX traded below 10. The last time it closed below 10 was February 2007. The VIX often functions as a contrarian indicator. As for the predictive value of a low VIX reading, there is a high correlation between an extremely low VIX level and large market declines. However, the VIX does not give us any information about the timing of a big sell-off other than indicate that one will likely (not definitely) occur.

In my opinion, an extremely low VIX level, like the current one, is signaling an eventual sell-off that I believe will be quite extreme.



Timing & trends

A Tale of Two Markets

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Posted by Gary Savage - Smartmoneytracker

on Monday, 15 May 2017 07:08

The next big trending move will occur in the energy markets. All the technical and cyclical signs are in place to suggest a major bottom is forming. In the precious metals market we have the exact opposite setup. This video will clarify how these two markets are likely to behave in the next several months.



Screen Shot 2017-05-15 at 6.43.09 AM



Timing & trends

The Top 3 Articles of the Week

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Posted by Money Talks Editor

on Saturday, 13 May 2017 06:48

1. Gold: A Tsunami of Selling

A chain reaction is forming the last great gold stock buying opportunity of the decade, says Lior Gantz, editor of Wealth Research Group.

....read it all HERE

2. Is Canada The Next Hot Money Victim?

One of the interesting things about the Great Recession was how Canada’s financial system sailed through it largely unscathed. Its banks were regulated wisely and behaved prudently, its citizens avoided the extreme stupidity of their credit-addicted neighbors to the south, and its government refrained from doubling its debt every eight years.

But instead of Americans learning from Canada, Canadians appear to have concluded that we had it right after all.

....read it all HERE

2. The Oracle Speaks … and Here’s What We Learned

Over the weekend, the annual Berkshire Hathaway shareholder meeting took place, an event sometimes described as the "Woodstock for Capitalists."

This event always generates a lot of press, and this year’s event was no exception. Here are a few of what I think are the most-interesting takeaways from Berkshire meeting.

....read it all HERE


Timing & trends

A Look at the Silver/Gold Ratio, Inflation/Deflation and the Yield Curve

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Posted by Gary Tanashian - NFTRH

on Friday, 12 May 2017 07:21

An email from a reader (of the eLetter, I think) calling me out on trying to make too many correlations in a dysfunctional market (I think that was his bottom line point, and he’s got a good point) got me thinking about the Silver/Gold ratio and some pretty interesting post-2011 dysfunction (so it seems) in the markets.

Markets that made sense in certain ways prior to 2011 no longer make sense in the same ways. For instance, the S&P 500 used to be correlated to the Silver/Gold ratio, which itself was positively correlated to inflation and/or inflationary economic growth. Gold also liked for silver to be leading it, not the other way around.




Timing & trends

Eerie Calm Shrouds Markets

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Posted by marctomarket.com

on Thursday, 11 May 2017 09:29

calmThe VIX, the volatility  of the S&P 500, is sometimes touted as a "fear index." Today is it extending its push below 10%, to fall to its lowest in nearly a quarter of a century.  
There has been four (Finland, Austria, the Netherlands, and France) successive European election that did not produce a victory for the euro-skeptics, who want to leave either the EU or EMU or both.  In Germany, the AfD has imploded and may be lucky to be represented in the Bundestag after the national elections in September.  A few months ago, some were talking about the possibility that Merkel is defeated in her bid for a fourth term as Chancellor.  Merkel and the CDU have done well in the state elections, and will likely do well in this weekend's contest in NRW, the most populous German state.  
Three-month implied volatility in the euro, a common benchmark has broken below 7% to trade at its lowest level since late 2014.  The low since at least 1999 was set in 2014 near 4.75% and besides briefly in 2007, it has not traded below 5%.    The fact that volatility has come off suggests participants are less worried about macro-events and in terms of the spot are anticipating range trading.  
The risk-reversal (skew in the pricing of puts and calls equidistant from the money, in this case, 25 delta)  has steadily moved to reduce the premium that is paid for euro puts.  In February, the premium for (three months) puts over calls swelled to more than 3%.  This was the most in five years. The premium fell and today stands near  0.25%.   Calls were briefly at a premium last February for the first time since 2009.  



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