Market Performance Summary for Tuesday, January 20, 2015
Tuesday saw the U.S. major stock market indices close near unchanged. U.S. Stock futures vs. fair value indicated an implied open around +85 points or more about 1 hour before trading began, that implied open fizzled quickly, and when the markets finally opened they rallied before selling off and spending most of the day in the red, before striking rock bottom around 10:50CT when the DJIA was down to 17,348. The DJIA then rallied from that point to the close, to close at roughly 17,515.23, +3.66 points or +0.02%.
The S&P500 had a similar pattern all day. Within three minutes of the 8:30amCT opening, it struck 2028.94, before selling off until approximately 10:53amCT reaching rock bottom of 2004.49, it then rallied back to nearly unchanged, but closed +3.13 points or +0.15%, to 2022.55.
The VIX closed down 1.06 points, or -5.06% to 19.89. I describe this as a mini implosion, and I’m shocked the market didn’t rally strongly when volatility collapsed today. There’s an inverse correlation noteworthy of significance between the trajectory of the VIX and the trajectory of the S&P500 (or really an inverse correlation noteworthly of significance between the trajectory of the VIX and the trajectory of every major stock index that there is). When volatility increases, the stocks markets decline; when volatility declines the stock markets increase. The VIX (measuring S&P500 volatility) is commonly referred to as “the fear gauge.”
Ticker USO, which matches the performance of West Texas Intermediate closed down to 17.48, -0.85, or -4.64%. I still believe oil is under valued here, and I think options traders could potentially place very very lucrative trades by trading ATM straddles using two week expirations. It’s been extremely volatile.
In other news for Tuesday, HAL (Halliburton) reported EPS, and shockingly, I believe it beat expectations. Shares closed up to 39.83, +0.70, or +1.79%. There were also some more rumors of the USA easing its embargo and trading sanctions against Cuba, consequently ticker CUBA (an etf matching the performance of the Herzfeld Caribbean Basin Fund) traded up to 8.93, +0.19, or +2.19%. Seems as though everyone has long forgotten the Cuban Missile Crisis [http://en.wikipedia.org/wiki/Cuban_missile_crisis], and the Bay of Pigs fiasco [http://en.wikipedia.org/wiki/Bay_of_Pigs_Invasion]. Personally, I don’t believe it would be appropriate for the United States to ease the sanctions, the embargo, or loosen the traveling, trading, and commerce restrictions, etc. with Cuba. The world nearly suffered its second nuclear exchange, during the Cold War of the Kennedy Administration, due to their shenanigans, luckily cooler heads prevailed.
In other news tonight, as of roughly 2:00amCT S&P Futures vs. Fair Value are indicating the DJIA may open -25 points, and the S&P 500 may open -1.40 points. Also newsworthy tonight, the Shanghai Composite Index (SSEC) closed up +150.39 points, or +4.74% to 3,323.44. The rest of Asian is trading mostly higher, with the exception of the Nikkei 225 Index (N225) which is down -85 points, or -.49%, to 17,280.48. Europe is expected to open up across the board.
I believe the market will continue to ponder the ECB and Mario Draghi and whether or not he will provide a euro stimulus package in excess of approximately 500 billion euros, perhaps as much as 550 billion euros.
By Andrew G. Bernhardt
Bernhardt Capital Management LLC 