Are the Financials moving in sync?
The Euro Zone is going to stay with the US Equity market for the foreseeable future. If anything, I think there is a dampening effect on whatever good news comes out of the economy. The issue now really is that the Euro Banks can no longer afford to put on the easy carry trade that the ECB made available and that the global bond market will have to suck up all of the available debt the PIIGS produce. As of today they want real money to loan money. How is that affecting the US Financial Stocks? Take a look below.
The AlphaVision™ for Bloomberg Landscape I am using is the standard IV30 – HV60 view. This is essentially my view for judging direction on the VIX and the other volatility products to see how much “weight” there is in the implied volatilities overall. The darker green buildings just mean that the IV is priced much higher than the individual names have been moving over the last 60 days. As we move into earnings season, this make sense (especially for Tech in the foreground) since most implied volatilities get bid up prior to earnings. As you look at the Financials in the S&P 500 they do not look out of the ordinary. Actually Citicorp “C” is looking darn right cheap right now post earnings on a relative volatility basis.
Zoom in below to see a detail of the Financials and I think something interesting is revealed. Note how all of the Financial REITS were up for the week while most of the money center banks got whacked (save for C and PNC).
This still reflects the situation in Europe even though most banks in the USA are probably avoiding European Debt for now. If the Property REITS are seeing a rebound with nothing untoward in implied volatilities, I think that bodes well for them moving forward. This might not be a bad time to pick up some of the better financials names that have already reported. If the property names can catch a bid, the banks that loan them the money are sure to follow.
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