Record Low Fear

Monday, stocks gained 0.5% in Asia but closed little changed in Europe and the U.S. on low volume. The VXO dropped 7% to close at the extreme level of 8.03. Here’s more confirmation of the source of stock market inflation.

Tuesday, stocks dropped 1.1% in Europe, and closed little-changed in Asia and the U.S. on low volume. The VXO rose 14% to close at 9.22 while the 10-Year U.S. Treasury Bond yield fell 2% to close at 2.26. Despite the limited movement, strong gains by Netflix boosted the NASDAQ to another record closing high. After the close, IBM reported another dismal quarter despite more creative accounting.

Wednesday, stocks closed little changed in Asia, but rose 0.7% and 0.5% respectively in Europe and the U.S. on low volume. IBM plummeted over 4% to well below the $150 mark which had been defended vigorously for months in reaction to stock weakness. Both the S&P and NASDAQ indices closed at new record highs.

Thursday, stocks in Asia gained 0.3%, in Europe lost 0.3%, and in the U.S. closed nearly unchanged on low volume. The NASDAQ eked out a slight gain allowing that index to register another new record closing high. Friday, stocks closed little changed in Asia, dropped 1.1% in Europe, and fell slightly in the U.S. on low volume.

The VXO fell 14% to close at 7.77 — the lowest ever! The 10-Year U.S. Treasury Bond yield fell 2% to close at 2.23. Now that the Fed’s number-one priority is to keep from disturbing their precious “equity markets,” this is a golden opportunity for the FOMC to either tick up interest rates and/or begin balance sheet reduction at the meeting next week.

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