Friday, March 1, 2013

Fleeting Glimpse- Volatility

There's something known to professional traders or anyone who has spent enough time watching the market, every once in a while you get a big hint in a very fleeting glimpse, usually so much so that if you were to look back on the charts say after you got home from work, you might never find it.

One of my biggest fleeting glimpses that is most relevant to the market since 2009 and since QE3 launched on September 13th of 2012 and EVERYTHING that has come out of the F_E_D and sentiment that it has created subsequently came at 2:26 p.m. on September 13th 2012 during Ben Bernie's press conference, this set the tone for everything I thought would happen with the F_E_D since and it disturbed the market a great deal ever since as you might recall, QE3's announcement created about 6 hours of rally.

It was a question asked of Bernie, I just was lucky enough to be listening and watching the market's response, it had to do with QE and inflation and the whole dynamic added to F_O_M_C statements, "Within the CONTEXT of PRICE STABILITY", because before that the F_E_D never gave a poo what inflation QE created. Bernie answered by saying that they would make adjustments to the size and composition of the purchases if inflation became a problem and for the first time since 2008 the market had its first, "Conditional QE", that answer marked the high of the day and it only got worse from there. The F_O_M_C also talked about changing guidance from date driven which is sure, to economic data driven which is unsure, then they started talking about whether QE was appropriate in the minutes and it has continued from there as the F_E_D is signaling they are considering their exit, which is another first for the market since QE started.

In contrast, this isn't such a big deal, but still likely a fleeting glimpse.

As you know, for the most part, volatility (VIX, VXX, UVXY) moves opposite the market, the move in volatility today is unremarkable, so are the following charts...
 VXX 1 min has positive divergence where you'd expect and moved as you'd expect, today there have been some small intraday ones causing the movement I;d expect, nothing more, it's unremarkable.

 UVXY is the same way

 The 5 min chart of VXX or UVXY or XIV looks a lot like this, green arrows mean price is moving in concert with 3C, there's no divergence, that's what today shows, nothing bad, nothing good, just unremarkable.

Then out of nowhere...
 The VXX 3 min chart goes strongly leading positive today

 I checked UVXY, it did the same.

I even checked the inverse XIV, it did the same. Why all 3 did the exact same at the same time seems to me as if there's only 1 reason, someone is making a move.

When large orders need to be filled they are broken up in to smaller orders so the predatory HFT's don't find "an Iceberg" and front run it, which is one of the most costly things for hedge funds and institutional traders. Of course they don't want the general trading public knowing either for the same reason.

It would appear to me that 3C in this timeframe with the same look-back period caught one of these chunks going through.

If so, remember, that's positive for volatility which is negative for the market.


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