Mind The Equity Risk Premium
So we made it through non-farm payrolls Friday unscathed. In fact, we got a humdinger of a number that at one point during the session propelled the S&P to new record highs. The next hurdle for markets: earnings season. On the whole, y/y earnings growth for S&P 500 companies is expected to come in somewhere…
Life In A ‘Negative’ World
This morning, following a blockbuster of a June payrolls report, we flagged the disparity in how US Treasury yields should have behaved and how they actually behaved. If you truly want to understand how distorted this market has become, have a look at the following chart going back to 1998: As you can see, this…
No, The Fed Probably Won’t Hike On Huge Jobs Beat
Coming into NFP Friday, it kind of felt like stocks were going to go up either way. After all, there was virtually no chance of getting a June jobs number as bad as May’s report, a modestly underwhelming print would keep the Fed on hold thereby forestalling the tightening cycle yet again, and in the…
The Fed is Out of the Way
Thanks to Brexit, political and global uncertainty the Fed is now out of the way for the foreseeable future. TheoTraders will know what the risks are in the market. Here's what to look for in bonds and stocks.
Big Macs and Big Buildings: The “Gates” Are Up In The UK
If you had no idea how the Brexit vote turned out, you could certainly surmise what happened just by glancing at the following chart: What do you see? That’s right, a stronger dollar, a stronger yen, and sharp declines in the Chinese yuan and British pound. Actually it’s not entirely accurate to call the pound’s…
Red Light, Green Light
Earlier this week, we explained how pretty much everything you’re seeing in terms of market swings can be at least partially explained by central bank frontrunning. Stocks up? Investors anticipate the Fed will delay its next hike thanks to the Brexit debacle. Dollar up? Investors know that even if the Fed doesn’t hike, it’s still…
Historical Volatility vs. Implied Volatility
TheoTraders look for disparages between historical volatility and implied volatility to determine what kind of an edge the market is giving us. TheoTraders love nothing better than to sell premium. However, that's not what the market is giving us right now. The SPX implied volatility is telling us that it is more advantageous to be…
Fed Minutes Reveal Pernicious Policy Paradox; Bond King Says Hang On To Gold
They needed some “additional data.” Data like a vote count from the UK, where the possibility of an imminent black swan landing sealed the deal for no FOMC hike in June. "Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data on…
Markets Look To Fed Minutes, Jobs Report With Wary Eyes; Goldman Sees “Drawdown”
If you think it feels a bit tenuous out there you’d be right. On the heels of a rather inauspicious Tuesday session that saw the British pound hit a 31-year low while crude and gasoline futures plunged on (over)supply concerns, it was risk-off overseas, a sentiment that muddied the waters on Wall Street ahead of…
Is the Bubble about to burst?
TheoTraders look back at past bubbles in the market to look for similarities within the markets today. It is important that TheoTraders keep risk at a minimum during a time when volatility can explode at anytime. Let's look at some of the pitfalls of trading in today's market so you can avoid them and become…