Monday, December 5, 2011

We are all going to be rich! Risk Off still intact regardless of realized rally. What you don’t see

We are all going to be rich!  Risk Off still intact regardless of realized rally.  What you don’t see

Earlier today we un-winded our vol skew trades.  After examining our market indicators, PFG doesn’t feel confident that a further rally is coming.  The perception of confidence is being gauged from “market breaking trades/black swan trades” - Euro Crap Bond vs Bund spreads came in, VIX collapsed and US Stocks rallied in response to the world getting short USD$.  However, it’s what we don’t see that has us concerned about the true confidence in this latest rally

1) Gold, no is one letting go - traded high correlation with news

2) EUR.USD has re-traced half the up move on swap line day

3) VIX didn’t breach 25

4) No confidence came into risky corporate bond long duration, still very high

5) Long Dated vols very elevated, TS very steep, indicates sharp sell off

6) Financials rallied, however the balance of the index fully priced.  Only a financial stocks rally can take this market higher from here.

7) Don’t see any inflow in EM assets, infact, people are getting out.

No comments:

Post a Comment