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Some Observations

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I have some quick observations.

First, stocks are more volatile intra-day than they have been in a while. This is not reflected in the VIX. This causes compression: buyers and sellers battle each other until one side wins out. When actual stock volatility picks up before index volatility, it can be a precursor for a large move in the indexes.

Second, this is the first day in a while that stocks haven't rallied on a weaker dollar. I believe this is how stocks should act, however, regardless of what the pundits have convinced investors of. We will see if this continues.

Third, bonds cannot seem to get out of their own way lately. Every time they rally, they fail. Stocks are also now exhibiting a positive correlation to bonds versus a negative one in the past. This is an important change. Stocks now know that they depend on low rates to keep the ball rolling.

My conclusion is that the stock market doesn't care anymore about this earnings season, much to the chagrin and loud objections of the bulls on the boob tube. The market cares only about future earnings now and stocks seem acutely sensitive to higher rates.

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No positions in stocks mentioned.

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