Earthquakes, Hurricanes and Rallies

It was an interesting day for trading, weather watching and international news. At 3:00 pm Chicago time, the DJIA closed near it’s high of the session, gaining 322 points to 11176. SPX was up 38.53, the S&P 500 Future was up ~35.50, and the NASDAQ Composite gained 100 points.

If you haven’t heard, the Washington DC area was hit with a 5.9 to 6.0 earthquake mid-day today. It was felt as far North as Rhode Island. Newark and JFK airport control towers were evacuated for a brief time, and trading at the NYMEX was halted for a few minutes as well. Bulls paused for only a few minutes, then charged ahead. That the market rallied while the U.S. Capital and White House had been evacuated was thought to be only a coincidence…. by some. Irene still 72 hours from making landfall – but where? Starting to track a little more North.

VIX closed at 36.08, a drop of ~15% or 6.36 points. September VIX Futures lost 2.20 points to 34.25, so the spread between VIX and the front-month VIX futures tightened significantly. October VIX futures which began the day at 31.00 fell 0.40 to 30.60. While the shape of VIX to VIX futures is still inverted (Cash is higher than front-month, and front-month is higher to further out months), the closer we get to a “normal” upward sloping curve, the happier the bullish camp. We’ll talk about “Contango” and “Backwardation” in the near future.

 Stock volume was good, as was US option volume. CBOE traded just under 5 million contracts today – not bad for the Tuesday after expiration in August.

Is this a technical bounce, Mr Bernanke fueling up his helicopter Friday for QE3, the end in sight for the Libya conflict? We’ll see……

Kearney