The Morning Hammer: The Bears Are Long F.O.M.O.
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The waiting game continues.
We've now gone 32 trading days without a 1% up move, and 40 days without a 1% down move.
It's been a beautiful ride for the bulls becuase they've been enjoying a picture-perfect grind up.
But it's been hell for bears, particularly those buying put options. The slow upward movement and declining volatility slowly kills the value of those puts a penny at a time. I always think it's far better to lose fast, because at least you get it over with.
Now it seems like a lot of bears are tempted to capitulate to stop the slow bleed. But at the same time, there's a big FOMO (fear or missing out) element.
What if you cover just ahead of what seems like an inevitable market drop?
I'm long VIX calls (which is basically a highly leveraged SPX short), so that's the boat I'm in. I'm down about 9%, which isn't the end of the world on an options positions, but I admit I'm growing restless.
SPX futures are up fractionally following a decent up day in Europe.
The stalemate looks set to continue ahead of FOMC Chair Janet Yellen's Jackson Hole speech this Friday.
It seems like traders are starting to buy into the recent hawkish trend in Fedspeak.
Fed fund futures now imply a 53% chance of a December rate hike, up from 45% a month ago and 9% post-Brexit on June 27.
That has gold and Treasuries sagging a bit.
Crude oil is off a little on the American Petroleum Institute inventory report. The API said we had a 4.5 million barrel build in US crude stocks last week, which was a surprise.
We get EIA data today at 10:30 a.m. ET. The current consensus calls for an -850K decline in inventories.
However, remember that oil has been moving on chatter about the September OPEC meeting. We're seeing a lot of conflicting news reports about whether OPEC will institute an output freeze or cut, so it's getting hard to gauge the importance of data.
I'm long oil (through the KYN and BGR closed-end funds), but I'm not going to hazard a guess as to what OPEC's going to do.
We've also got Existing Home Sales and the FHFA House Price Index on tap today.
Housing stocks were up huge on yesterday's big New Home Sales numbers, so maybe there's action there again today.
But I think biotech (IBB) may tell the tale for now. That group's been pretty strong the past couple of days, and recent history shows that when biotech does well, the bears tend to fail.
Good luck out there.
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