A Super Sized Squeeze

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UPCOMING EVENTS

A Super Sized Squeeze The good old-fashioned short squeeze. This most often happens in the stock or futures markets when a rapid increase in the price of a stock or future that occurs when there is a lack of supply and an excess of demand for the stock. Let's take a look what some at how some derivative-base ticket brokers have tried to game the system over the last few years with our beloved Super Bowl. As the CEO of TiqIQ, Andrew Tulloch, tells us (via The Daily Beast): "Two days after the conference championship game, the cheapest ticket for Super Bowl XLIX was going for under $2,000. That same cheapest ticket—also known as the "get-in price"—is now going $9,600. While good old-fashioned demand played a role in this year's run-up, like 2008's market-based Black Swan euphoria and subsequent crash, the 2015 Super Bowl dynamic was driven principally by derivative-based speculators looking to make a quick buck. So, here's what I have experienced first-hand when attending events such as the NCAA Final Four or another big event that has a lot of attendees traveling from out of town. These people usually have money and/or are attending a corporate event (usually both) and are not about to arrange for flights and hotels without having a ticket to the event in hand. So, you get a time-demand curve that looks something like this (ignore the red line for now): You get a nice run-up once the event participants are announced and then demand wanes. The ticket brokers know this and adjust their prices to demand and make a nice profit. That is good business. Identify a need and profit from that need. No issues there. But look at the red line on the graph. That's this year's demand curve. See, what happened is that less reputable, probably under-capitalized "brokers" made the promise to clients to deliver tickets (that they did not have yet) at historically elevated price levels. Then simply wait for the price to come down, buy the actual ticket and book the difference. Genius! Now, those speculators who "shorted" the Super Bowl ticket market are looking at losses of nearly $8,000 per ticket! On top of that, good luck tracking these jokers to get your money back. These guys are long gone into bankruptcy (or just gone) with their shell companies (or mall kiosks) after taking losses like this. So who wins? The NFL and their owners at the expanse of their own fans do!  Again from TiqIQ's CEO: "As a lawsuit filed last year makes clear, less than 2 percent of Super Bowl tickets actually become available to the general public. The NFL controls who gets the rest, with the two participating teams getting 17.5 percent, the host team getting 5 percent and each NFL team getting 1.2 percent each." Not to be too jaded, but this is maybe a very relatable example of how it's those that play by the rules get cut out and taken advantage of. I think we are kidding ourselves if we think this isn't happening at a much larger scale all over our financial markets in one way or another.

It was a fight or flight day in the markets on Friday. Buyers were left with that choice, and boy did we see some flight. The fight came early on as buyers tried to rally the markets back, but then the markets started to pullback. From there, it was all downhill, literally. Under tremendous selling pressure, the major averages tanked and finished off the day and month in negative territory. We are also seeing some aggressive reactions off of economic data as of late, as that is also fueling the volatility in the markets. We are at critical support levels in the SPX. With a ceiling and a basement in play for now, we haven been in a wide congestion zone the last two weeks. If either level gives way, we can see a strong breakout. Since we are near the lows, look for buyers to start making a push back to the 2064 range in the SPX. of we break below 1975 and we find resistance at the previous support range, there is a off chance we can push to the lower 1800 range. That would signify a major pullback in stock prices. Watch for the battles between buyers and sellers for now. I like the upside this week, but anything can happen in these market conditions. It is no longer the easy up trending markets we have been accustomed to the last two years. Read More

TECHNICAL DATA ES 2009.25/1991.75 POC 1988.50 YM 17,147/17,101 NQ 4152.25/4138.75

Some of our recent conversations have revolved around the VIX and the related trading vehicles that are available in the marketplace, namely VIX and VXX. The VIX and VXX are not the same. The VIX is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. This is 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. Think of VXX as a company called "VXX " that sells this month 's volatility "insurance" contracts (VIX) and uses the money to buy contracts for next month; they keep rolling the contracts over. The VIX time structure is normally in "contango" meaning the nearer expiration is lower in value that the following expiration. So, this is a decaying asset. The only way that VXX can go up is if the time structure enters into "backwardation" where the front month is over the back month for a sustained period of time. This simply doesn't happen save for a few isolated incidences. Why is the time structure nearly always in contago? It's not because people generally expect next week to be more volatile than this week, but simply because there is less demand for insurance against this week 's events. The market assumes this week 's risk is already in the prices.  Read More

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