The market is definitely looking a little better after the opening this morning. There was the inevitable selling off after the Euro Zone finance ministers could not decide how much money to give Greece. After setting up a few more hoops to jump through, the Greeks seem to be on a better path to less spending (Congress and the President, take note), and I think that bodes well in the longer term.
This last of many hiccups sounds like retribution for all trouble Greece caused. At this level, the ECB, Euro Governments, and Greece are in, so we should see a result soon. US economic news is a little stronger this morning, as the small business index from the NFIB picked up a little steam to 93.1, which was above expectations.
VIX ACTION
What did the combination of news do to market volatility? After pressing higher this morning, the VIX is back to 16.02, and as I write this, up about .02. The reality of the fiscal cliff is now I think known and priced. We know what the worst case is (I don’t think Washington can make it worse except push the decision off some more) and there could be quite a bit of positive. A combination of reduced spending and more revenue is coming. The economy can handle it, but the economy cannot handle endless uncertainty (ask the Europeans).
THANKSGIVING TRADE
From a trading point of view, one of our Pro clients named an observation of mine the Pilgrim Pivot this morning. Last year, just before Thanksgiving, there was plenty of gloom in the air. The Euro bailout was uncertain, and it pulled stocks down (JEF was in trouble and just got bought out this week as an omen) with the VIX trading over 30.
BROKEN WING BUTTERFLY
I see more of the same as we move into Thanksgiving this year but on a smaller scale. There are some doubts and some issues, but a resolution is on the horizon. Stocks are poking around at 3 month lows too. The VIX closed out at 27.53 just after Thanksgiving 2011, and funny enough, that was the high for 2012. I think a broken wing butterfly skewed to the upside for a run up would work best in the December cycle. In the meantime, while the politicians on both side of the Atlantic get it together, the position will collect a little theta.
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