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T3’s Take 3: Mr. Market Is Still Telling the Most Boring Story on Earth


1) What a Boring Market

Stocks are still in sleep mode, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite showing next-to-none movement.

The Russell 2000 fell -0.5% to 1384.09, and in today’s low volatility environment, that actually counts as major movement.

Traders are still debating just how hawkish the Fed is following its statement last week.

That’s driving continued profit-taking in the US dollar, which helped gold catch a bid.

Regional banks, which have been key in the post-election rally, are still dropping, while US Treasuries perked up again.

2) Wait and See?

We’ve been falling asleep for the past month as day-to-day movement has gone to basically nothing.

The word on the street is that traders are waiting on Thursday’s healthcare vote before putting their chips down.

However, throughout the year, we’ve seen plenty of big events — Trump’s inauguration, then his first address, jobs numbers, the ECB, Fed statements, etc. — and none have driven real volatility for more than a few hours.

So my big concern is that we’ll see some fireworks on the healthcare vote, and then head right back into this low-volatility snoozefest.

3) But There’s This…

This morning, Bloomberg News reported that the CBOE SKEW Index rose for 5 straight days, the longest streak since June 2016.

This indicates that traders are paying up for out-of-the-money options, which only pay off in the face of a huge market move.

According to Bloomberg, the last time the SKEW Index was so high relative to the VIX, the VIX surged 65%.

However, before throwing your money at VIX calls, consider that we’re dealing with a sample size of 1 — that’s far from reliable.

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