The fear index (VIX) declined slightly.
Treasury long bonds (TLT) were a reverse image of stocks, opening within the day-before range. The decline high to low traversed 0.6%, with the macd bear signal strengthening on its sixth day of existence.
Low bond prices illustrate expectations of higher interest rates. Minutes released yesterday showed one member of the Federal Open Market Committee, Mr. Hoenig of the Kansas City Fed, turning a bit soft on ultra-low interest rates.
"Mr. Hoenig believed that it would be more appropriate for the Committee to express an expectation that the federal funds rate would be low for some time--rather than exceptionally low for an extended period. Such a change in communication would provide the Committee flexibility to begin raising rates modestly," the minutes said. So, no surprise about bonds. And perhaps also about stocks, because a greater willingness on the part of the Fed to raise rates would indicate a serious recovery underway, good for business, good for profits. On the other hand, it is only one dissenter, and generally the FOMC sings in perfect harmony with the Fed chairman. So it's important not to overweight the significance of Hoenig's dissent. High-yield corporate debt (JNK) moved up sharply. Although it is an interest-rate instrument (up on lower rates, down on higher), it is mainly a measure of faith that the bond-issuers won't default. So I'm not overly shocked to see it moving with stocks, not with Treasury bonds. | Nobel-prize winning economist Joseph Stiglitz traces the origins of the recession, rejecting the easy answers, criticizes the government's response to the crisis, and discusses ways to fix the profoundly broken system. |
Among my holdings, interest-play AOD has gapped down. The iron condors that expire at end of business Friday, CVS and ERTS, remain in profitable territory. Several attempts to sell were unsuccessful, as often happens at the end of an option's lifespan: There's no market. The two covered call positions, MCO and PALM are trading well below their strike prices and so are likely to expire unexercise, leaving me with the stock in my portfolio.
Let's run the numbers:
Indicators, at about 10:45 a.m. Eastern:
- Blue chip stocks etf (SPY) is trading at $110.34, entered macd bull mode at close on Feb. 15 (at $109.74)
- Fear index or volatility (VIX) 21.74, bear (bullish for stocks), Feb. 12 (22.73)
- Treasury long bonds (TLT) $89.14, bear, Feb. 9 ($91.18)
- Corporate junk bonds (JNK) $38.35, bear, Jan. 20 ($39.63)
- Emerging markets (EEM) $39.50, bull, Feb. 16 ($39.43)
- Gold (GLD) $109.48, bull, Feb. 12 ($107.04)
- Oil (USO) $38.10, bull, Feb. 10, ($36.51)
- Dollars per euro (EUR/USD) $1.3619, bull, Feb. 16 ($1.3770)
- Yen per dollar (USD/JPY) ¥90.90, bull, Feb. 16 (90.13)
- CVS, iron condor (p29/-p31/-c34/c36) $33.97, bull, Feb. 10 ($33.21)
- ERTS, iron condor (p15/-p16/-c18/c19) $16.64, bear, Feb. 9 ($15.96)
- MCO, covered call (-c30) $26.97, bear, Feb. 4 (26.39)
- PALM, covered call (s/-c13) $9.36, bear, Jan. 26 ($11.17)
- AOD, long shares, $8.14, bear, Jan. 21 ($9.03)
- AKS, iron condor (p19/-p20/-c25/c26), $22.91, bull, Feb. 12 ($21.68)
- CAL, covered call (-c19), $19.87, bull, Feb. 16 ($19.88)
- CSCO, iron condor (p22/-p23/-c25/c26), $24.10, bull, Feb. 8 (23.50)
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Topics: S&P 500, SPDR, Spiders, Treasury bonds, high-yield corporate junk bonds, emerging markets, gold, precious metals, oil, petroleum, AK Steel Holding, Alpine Total Dynamic Dividend fund, Continental Airlines aviation, Cisco Systems networking, CVS, pharmacies, drugs, Electronic Arts games, Moodys bond rating, Palm smartphone Pixi Pri.
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