Buzz and Banter
I was commenting to my macro analyst this morning that the market the last few sessions has had a decidedly different "feel" to it. Instead of rallying sharply off of declines, the declines have tended to continue off of a rally attempt. This could be nothing, but as Todd said in "Love for Sale," it warrants a trader's attention. In terms of volatility it also may be important.
Volatility declines when selling is met by buying. If the supply demand picture changes, this often causes volatility to pick up. This we have seen in the last several sessions. Liquidity changes the market only on the margin. Eventually, the market is going to go to equilibrium even if liquidity remains high. How a market acts in the face of liquidity tells the story.
The structure of the skew in index options is still relatively flat and the at the money options remain at around a 19% volatility. This indicates relative complacency.
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