Previously Owned U.S. Home Sales Unexpectedly Fell in March

Purchases (ETSLTOTL) of previously owned houses, tabulated when a contract closes, fell 0.6 percent to a 4.92 million annual rate last month, figures from the National Association of Realtors showed today in Washington. Themedian forecast of 75 economists surveyed by Bloomberg projected sales would increase to a 5 million rate. Prices climbed, reflecting more demand for higher- priced houses.

 

VIX Down

VIX is the ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period. The VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, which is then annualized. The VIX Index was developed by Prof. Robert E. Whaley in 1993 and is a registered trademark of the CBOE.

As VIX drops below 15 for the first time in almost a year, the clarion calls of ‘all-clear’ should perhaps be tempered with the record-steepness of the volatility term-structure. Simply put, everyone and his mom is now selling short-dated vol but mid-term vol remains stubbornly high – in English, we’re safe today but tomorrow could be a disaster – or given medium-term risk outlooks, short-term traders are the most complacent they have ever been.

The writing of covered calls – or overwriting to juice returns – seems to be reaching crescendo levels given this steepness. Writing premium is a no-brainer trade until it reaches down your throat and rips your guts out…

Each time the VIX/VXV term structure has reached down to these levels it has snapped back extremely quickly – this is a record steepness for the short-term vol term structure and should be viewed with massive skepticism.

Rough Market?

Everyone keeps wondering when this Teflon market is finally going to crack.

Here’s one chart, via Doug Kass, that more and more people are paying attention to.

It’s the S&P 500 (red line) vs. the ratio of the Dow Transports vs. the S&P 500 (blue line).

The idea among some “Dow Theorists” is that when the Transports get very weak (relatively) it’s a sign that the market as a whole is doomed to fall.

It is pretty stark the gap that’s opened up this year. At a minimum it at least shows that some parts of the market are getting roughed up by the rise in oil prices.

More Hope, No Change: Stocks edge higher on earnings hopes

U.S. stocks rose Tuesday after aluminum producer Alcoa issued an outlook that suggested improving prospects for the global economy.

The Dow Jones industrial average, the broader Standard & Poor’s 500 index and the Nasdaq composite index all jumped close to or more than 1% in the first few minutes of trading. Late Monday, Alcoa CEO Klaus Kleinfeld predicted that global aluminum demand will increase 7% in 2012.

Fourth-quarter revenue for Alcoa (AA) topped expectations and the results gave investors hope for a strong earnings season in the U.S. They also are looking to a new round of talks in Berlin for progress in solving Europe’s debt crisis. European markets are sharply higher.

Stock trend

Dow Jones industrial average, five trading days

On the negative side, luxury jeweler Tiffany & Co. (TIF)reported weak holiday sales growth in the U.S. and Europe, and shares dropped more 6.4% in early trading.

The U.S. economy has shown signs of strength recently, and investors are hoping that will boost corporate earnings results due to be announced in coming weeks. In particular, improvement in the U.S. labor market has raised the possibility of a recovery in American consumer spending, one of the main motors of global economic growth.

The European Central Bank said Tuesday that the amount of overnight deposits that the region’s banks held with it rose to 481.9 billion euros, or $613 billion, on Monday, breaking the record 463.6 billion euros set only a day before.

ALBERT EDWARDS ISSUES WARNING: A S&P 500 ‘KILLER WAVE’ Is Forming

Societe Generale’s Albert Edwards points us to a terrifying technical sell signal in the S&P 500: the “killer wave.”  This formation was identified by Investors Chronicle’s Dominic Picarda.

Here’s how it works.  The Coppock indicator–an esoteric momentum measure (Wikipedia description) –turns down giving a sell signal.  This happened last summer.  Before the indicator dips below 0, it moves up again, which it did in April of this year.  The “killer wave” formation is completed when the Coppock indicator turns again. And what happens next is real ugly.

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