Too Fast Too Soon?

• July 30, 2002
• Joe Corona

The market had one helluva day yesterday. As I
write this (3:52 am CDT), the market looks like it is trading a bit lower. The
DJI futures are about 50.0 lower on the bid, the S&Ps are about 5.0 lower, and
the Nasdaq 100 futures are about 5.00 lower as well. The dollar is a tad lower
and crude is a tad higher.

The overseas markets are
picking up where we left off. The Asian markets picked up where we left off with
the Nikkei picking up 337.05 or 3.49% and the Hang Seng gaining 203.39 or 2.04%.
In Europe, however, it is a different story, the FTSE is down 41.80 or .99%, the
DAX is  off 62.62 or l.62%, and the CAC 40 is down a shade losing 2.94.

Rather than dwell on yesterday’s gains, percentages and sectors, I would like to
look at volatility. No matter how you measure it or which index you follow,
implied volatility was absolutely slaughtered yesterday. The
VIX (below) lost 6.72 points to close at 33.72,
down 16.62 % on the day. It was just four trading days ago that the VIX
was challenging the September highs above 55.00! The
VXN (second chart) lost an incredible 11.45 points or 16.59 %,
closing at 57.57. Only one trading day ago the VXN was up above 70.00!

VIX Daily Bar

 VXN
Daily Bar

Although I think
volatility will trade lower over the next month or so, this feels like a little
too much too soon to me. We have July consumer confidence at 09:00 CDT and
KLA-Tencor
(
KLAC |
Quote |
Chart |
News |
PowerRating) earnings tonight. If the market trades higher,
I will be looking to lighten the load. If something were to change between now
and the opening (something to create a gap higher), I will be selling into it.

Be careful and have a good day.

Joe