Saturday, July 13, 2013

Shorting Treasuries- the Next Big Trade?

My take, at some point yes, but 20+ year bull markets will not end with a whimper. The signal that the treasury bull has ended will come from a massive sell off, followed by market pundits resorting to calls of "buy the dip" or "this is a temporary decline". We are just not there yet.

Friday, July 12, 2013

Think This Sends A Good Signal On the Economy

Earlier today, UPS preannounced a shortfall in second quarter earnings. The stock acted just you would think it would....

The company stated in their press release.....

Overcapacity in the global air freight market, increasing customer preference for lower-yielding shipping solutions, and a slowing U.S. industrial economy drove revenue and operating profit below expectations. In addition, UPS experienced some slowing in package volume growth as a result of labor negotiations.
“We expect the second quarter market trends to persist and UPS is adapting to meet these conditions,” said Kurt Kuehn, UPS Chief Financial Officer.

Further still, the company expects weakness to persist through 2013 stating “Despite downward revisions to economic forecasts for the second half of the year".....

Slowing industrial growth, a persistent slowing in the economy, customer's trading down to lower-priced options..... this just screams an improving economy as predicted by the equity markets right?

Monetary Theory and The Trade Cycle- Hayek

The Austrian Theory of Boom and Bust

Fear the boom

The bust

A cluster of errors

Price/Volume Diffusion Index Improving, VIX Remains Bearish

Just  a quick update on my price/volume diffusion index and the weighted average standardized VIX. My Price/Volume Diffusion Index has turned away from the 50 demarcation, increasing to 54.58.

This is as the market has rallied over the last few weeks. This is mainly a price driven move, as the volume levels has been anemic relative to the supply lines established on the decline. That said, this suggests the bias remains to the upside. For now.....

This is as the weighted average standardized VIX (WASV) remains pointedly bearish.

The WASV approached and pulled back from a 2 standard deviations. The WASV is suggesting an increase in risk levels. The pullback off the 2 standard deviation in recent days suggests some alleviation of this, but extreme level (over 2) failed to occur, meaning that the crescendo in the rise is risk levels may still pass.

Additionally, the skew in the VIX continues to decline.

A reduction in the positive skew means the VIX is moving towards the central tendency, i.e. a higher VIX.