I had the opportunity to speak at an event with a smart group of market professionals last night.
Weird day, they said.
The price action could be characterized as unsettling. Copper collapses, to go along with oil down 60%, and then U.S. bonds, Canada tens and Japan tens all put in record-low yields. It was the 10th day in a row that stocks had a 1% or more intraday move, the first such streak in quite a long time.
I think under any normal circumstances people would be getting really short, but it's kind of hard to do that when they could wheel out a Fed official at any moment and say that we're not hiking rates until 2016/17/18/etc. (which of course would then rip the S&P 100 handles).
It's definitely one of the strangest markets that I've traded in. I've owned SPDR S&P (SPY) puts for a while and I'm happy to own them because the index has failed around 2,100 several times now. We've also traced out a pretty textbook head-and-shoulders top. If oil bounces along with the euro, things could get interesting.
What's also interesting is that nobody even talks about tech anymore. Back in March of last year, it was all anyone would talk about, especially Tesla (TSLA), which has rolled over in a pretty major way. I wrote several pieces here on tech valuations last year. I expected tech to completely fall apart, but it seems to be only gradually declining. I would keep an eye on Facebook (FB) -- clearly the bellwether here. If Facebook goes down, it will take the whole space with it (and probably the startup market, too).
We got word yesterday that Apache (APA) is giving us the first real layoffs in the energy space and there will probably be more to follow and the press will probably make a big deal about it. But I don't think that energy job losses will really have a material impact because they will be offset by gains somewhere else. But people getting fired is more interesting to write about than people getting hired.
I've been asked my opinion on oil a lot in the last few days and, quite honestly, I think it's done going down and I don't think there's going to be much of a bounce. I think it remains in the $40s or low-$50s for a while. If you pointed a gun smartly at my temple and told me to pick a trade in energy, any trade, I would probably say to sell straddles/strangles in United States Oil (USO). It sounds suicidal, but with option premium all jacked up, you are being compensated for the risk.
I have a feeling there are going to be some great opportunities arising in the coming weeks and months and you can't take advantage of the opportunities if you're not involved. For example, I was discussing the merits of selling or buying iPath S&P 500 VIX Futures (VXX) calls over dinner last night. VXX calls look perpetually overpriced, until they're not. Out of any trade in the volatility complex, they're actually the best tail hedge. Be on the lookout for things like that. Situations like these are where you can make your year in a couple of trades.