2 versus 8 months spread below. Seems picking up dimes in front of the steamroller "vega" neutral strategy blowing up for some "smart" guys.

Note the elevated Apple "VIX", VXAPL.

If you really must hold Apple longs, overwriting strategies in this name look interesting.

6 month vols new all time low....on a daily basis.

Fed's BS expansion has helped equities, but more importantly the expansion has managed suppressing volatility across assets.

We at TME consider this more important as this is where the real risk is "managed" and volatility is the asset of our choice to use for playing possibly "distorted" asset prices.

Remember bond vol index, MOVE index, that refused coming down pre the latest Fed BS expansion. Well, the Fed "fixed" that.

Fed's BS taking a small "breather" here as per the latest update.

This itself is not the panic chart many will be pointing out later today.

Nothing huge at the moment, but watch CDX IG for possible signs of risk in the credit space.

Below is the CDX IG inverted versus S&P chart.

"If increasing USD liquidity is needed to re-incentivize foreigners to buy into the Treasury market, then the Fed may have to buy more than $ 20-30bn a month for another looooong while, especially if the current market QE-psychology loses steam when the Fed tapers the current $ 60bn a month purchase tempo."

Great latest piece by Nordea worth a read,

https://e-markets.nordea.com/#!/article/

One of the better Fed charts, by the great macro team at Nordea.

From upper part of the channel to the lower part in no time.

1. Are we elevated? Yes. Is it a bubble top? I don’t think so, not yet..

2. We are at the upper part of the cycle, the “advanced stage” of the cycle…

3. ….but from any point in the cycle anything can happen…

4. The probability distribution is negatively skewed however - but it does not mean that we will go down tomorrow or even this year

5. It is however a better time to decrease risk

6. There is real FOMO, pro-risk behavior in the market right now

7. You should have less risk on than normal, time to take some chips off the table

8. We will continue to keep the risk off and prepare for the next downturn and hope there will be one…

Time to look at HYG closely post the latest oil implosion.

Oil is a story itself, with massive longs caught wrong and confused post the Iran and Libya "events", but there is a "virus" part to the oil story as well.

S&P does not care about much at the moment, but will this change?

S&P versus oil below.

Most people do not trade the EM space risk, but this is one of the risk areas that has a lot of the "hidden" risk, not visible unless you trade some of that risk.

A week ago we shared JPM's quant guru Kolanovic's view on EEM offering cheap hedges.

""The strong spot performance has resulted from material contributions from both its local equity and FX legs, with 20% of the return coming from EM FX strength. We recommend longer-dated EEM puts to position for potential upside in implied volatility while protecting recent gains."

TME comment, agreed on the above and EEM spot looks a bit "stretched".

EEM volatility, VXEEM, started moving sharply higher 2 days ago, but not many were "spotting" it. We believe the prudent investor should look at all EM related risk here. Viruses or not, this space has showed recent "stress", that could feed over to DM risk.

Below is the VXEEM versus VIX chart we have been pointing out over past days. Longer term dislocations are not common, so watch the gap closely, especially as people have become rather complacent about risk.

Link to the EEM chart last week,

https://themarketear.com/posts/c25QSzA40

China has not been a part of the recent narrative, but things could easily change focus...

The trend channel is still intact, and note how far down the 50 day average is as well as the channel lows.

Oil volatility, OIV, versus VIX gap is getting rather wide here. If oil is the economy or not we leave to others to decide, but keep this gap on the risk radar going forward.

as it pushes the HOW MANY? question till the following Friday and right now the HOW MANY long speculators are left question is a very key piece of information.

h/t @RobertMacMinn, the man with oil in his veins.

According to the chart below by Nomura it definitely looks so, and CTA hedgie we track that provides daily p/l has ben adding to gains over past days (+2.7% YTD), but hard to say where it comes from on a daily basis. The December fund report revealed VaR in equities was sharply down, and commodities up, so that is a bit of a contradiction to the chart below.

Average daily rates for next day reservations in 4/5 star hotels in Macau and Hong Kong needs little commenting. HK had a pick up (dead cat bounce) but is back to recent lows again, and that is prior to the virus outbreak.

6 month vols are sold hard, again...

German 10 year yield at very big and important levels here, last -0.25%.

Watch the trend line since August lows closely.

Recall oil "speculators" are still very long and the past Iran and Libya "events" have managed creating an interesting psychological set up in oil, and it is not to the upside.

Oil and oil volatility below.

...inside the big formation. Time to break out soon?