The overnight range in the SPX futures has been 6 points, on very light volume. The overnight range in the Euro has been between 1.2480 and 1.2510. The 10 year Treasury yield has traded within 1.5 bps of unchanged overnight. Oil, gold, and copper all hover near flat as well. I think the last overnight trading session that was this quiet was all the way back in April, and certainly not consistent with a VIX near 20 (acting more like a VIX near 14).
It’s evident that everyone is again waiting to make their bets near the end of the week as the European summit outcome becomes clear. Merkel spoke this morning, again outlining her resistance to Eurobonds, and indicating that the Germans’ willingness to put up more money with no conditions is limited. Merkel and Hollande will release a statement midday today. Italian premier Mario Monti is obviously frustrated at the lack of progress ahead of the summit, threatening his resignation if more concrete steps were not taken to backstop Italian yields.
As I mentioned yesterday in my SPY trade update, where I took off my SPY weekly 132 calls that I had on as a hedge, this summit playbook feels different to me. Maybe I am wrong, but after the 16 hour rally post-Spanish bailout 2.5 weeks ago, and the 8 hour rally post-Greek elections 1.5 weeks ago, it seems to me that we might have no rally on this summit news. I’d rather stick with my convicted positions than potentially burn more money on a hedge trade.