Enis’s Macro Wrap – Rag Doll Market

by Enis August 15, 2012 7:46 am • Commentary

This bizarre market is flimsy enough to be pushed around like a rag doll in both directions.  In the past 2 days, the SPX has closed almost exactly unchanged.  On Monday though, the VIX was down a full point to close at 13.70, in surprising price action, particularly for a Monday (and even taking into account the partial effect of the roll calculation).  Yesterday, the VIX opened higher, and closed up more than a point by the close, even though the market ended unchanged again.

This type of price action indicates a market that is easily pushed in either direction, whether the volatility market or the cash market.  Very few participants have been engaged, but if large players do get involved and want to move investments, then they will inevitably move markets.  Suffice it to say, it should be an interesting fall for this rag doll market.  


  • Asian volatility has picked up, as the Hang Seng and Shanghai indices were both down more than 1% overnight.  Chinese policymakers have signaled their reluctance to institute more monetary stimulus due to inflation concerns.  Not surprisingly, copper is still hovering near 9 month lows.
  • Europe has been in the red the whole session, but only down 0.5%.  Economic data was light
  • The dollar is broadly stronger for the second day, but in an interesting divergence, Treasury bonds are selling off for the second straight day.  Worth watching going forward, but the dollar is showing better relative strength than Treasuries overall.
  • Deere reported weaker than expected results and cut guidance, specifically citing weakness in international markets, mentioning southern Europe, India, China, and South America as weak spots.
  • Economic data today includes CPI, Empire Manufacturing, and Industrial Production among others