April Action

April has been another lousy month for front running volatility nerds. The VIX has been range bound between 17 and 12 which is nearly half the value from the top of the range in January. Equities have been supported by a variety of central bank chatter though many of the tech stocks such as AAPL and GOOG look to have some serious price fatigue. Negative rates are ultimately a sick cousin which may infect the notion of central banks being able to cure all that ails the markets. If things are getting better how come the world needs negative rates?

The Fed believes it can lead rates higher just as boldly as it aggressively accommodated lower rates in the worst of the 2009 to 2014 economic down draft. Equity prices however are not cheap and several keys to growth such as real estate are looking as if they are ready to heave into another leg lower. There has been a fundamental shift in opportunity growth in the U.S economy and it has had a direct negative impact on the largest investment in most peoples lives, their homes.

March Action

March like February has been primarily a short covering month, squeezing managers to make purchased they thought they might get a lower prices. Volatility certainly has been subdued despite all the claims at the beginning of the year of powerful ranges for as long as the eye could see. Selling volatility it seems is the only thing to do when the Fed plays such a powerful role supporting equity prices. The VIX once again has proven to be the most useless predictor of volatility and has as much validity as the put/call ratio.

While the correction was scary in January, it did little to correct much of the ratios which indicate overbought values. But equity prices, especially U.S. equity prices, are the place of intervention and provide the most immediate gratification for central banks to influence the real time value of world equity prices. And though the commodity crash of the last eighteen months caught the Fed and central banks by surprise, they have effectively scripted a dollar play to allow then to have the largest economy raise rates while the rest of the world goes to negative rates.

As the world of trading and investment moves toward smart systematic solutions it will be interesting to see if the interventionist maintain the same level of influence. The best algorithms make money no matter what is going on, and that in itself indicates the machines might ultimately drive prices to values, up or down, nearly isolated from a speech or human method of intervention. That is unless they turn off the machines.

February Action

February has two trading days left and has not followed through on the downside.  Trend picking managers who picked the downside trend category will have decent give back for the month but even more adaptive and certainly more successful approaches than pattern recognition may have some blow back on their big January gains.  Suspicious price action looks a bit too convenient for the bulls and may represent the unrestricted financial instrument purchases by sovereigns.  It is all part of the make up of market participation these days.  Still the battle will be to make sure first quarter lows hold.  If they do not then a severe break will unfold.

Searching for a Market Low

Looking for a bottom in markets is always a blurry view of the present. As posted here in September, markets seemed to headed to a 20% to 25% correction but whatever the ultimate low move, that low occurring in the first quarter of 2016. The sideways to higher move off the lows would then be tested probably in August. A failure of that test would take the market to the unpleasant territory of a chance of producing a 50% correction from the May 2015 highs in the S&P 500. All markets have a 50% correction at some point in their life cycle. All markets.

BaseOp2.com has now moved over to CoverRisk.com. Both links get you there.

Loading Up Up Here

Recent pushes in GOOG and AMZN is clear evidence that loading up certain stocks is a soft spot for managers needing  help to click the buy button. These two stocks in particular, as many before them, have to stretch price to accommodate all comers.   GOOG oddly does not have extreme riskvalue problems but that does not mean it could not have a 150 dollar correction.  CoverRisk data says GOOG is better than AAPL but on a pure dollar down basis GOOG will decline more than AAPL,   it is just that more owners of AAPL will be underwater than GOOG.

IBM has cleared the worst of the riskvalue issues and has the best relative outlook.

GOOG or AAPL

With one week to go, AAPL is a bit lower to unchanged on the year with GOOG up $224 per share or about 42%.  So it would seem GOOG may be more extended but it is still AAPL carrying the over value based on the algorithmic scoring data calculating the QRiskValue from 2008 to present.    

Markets Slide

Markets continue to slide as the retracement of the bull run evolves and the 2008 trading pattern takes hold.  October will be the battle ground to determine if equities accelerate towards a low correction bottom in the first quarter of 2016, or are able to stabilize within the -20% to -25% pull back zone.

Fed Basically Admits It Is Afraid To Stop

Fed action basically admits it is harder to sustain any asset value now and will need negative interest rates to keep the economy afloat. The greatest bubble in modern times may have gotten new life as Yellen cannot stop the life line to equities.  Keeping it all in the air may be difficult as there is little the Fed can do to cure a panic.  

Fed Day

Whether the markets explode higher, crashes lower, or just lays an egg in the next few hours, alternative strategist should have already banked more than enough return this year to easily handle any volatility.   Buy side investment bias is the trading opportunity gift which keeps on giving and is based on bizarre notions of market efficiency and macro trend expertise.  Successful alternative strategies execute a in probability game where positive outcomes are not dependent on a bull market or a Fed which has helped float an industry based on a faulty decision bias.