If You Are Not Confused…

Then you just aren’t trying hard enough!

So the S&P took in weak bank earnings, improvement in China with hints of stimulus, downgrades in Europe, noise about how close or not Greece is to a negotiated default (I mean haircut), and finished the 2 US trading days a total of 2 points lower.  We are well off the highs reached during the period and well off the lows.  Yes, in 2012, 1% is considered a decent sized move.

Is everything priced in?  Bears are convinced investors are too long and too complacent.  Bulls are convinced everyone else is bearish and too underweight.

In spite of everything, most of the “good” news has been coming out of Europe, and most of the “bad” news has been coming out of the US.

A gallon of Evian costs more than a gallon of gas, and at this rate, air will cost more than natural gas.

High yield bonds, one of the assets most correlated with fund flows is doing nothing in spite of massive fund flows.

The VIX is confusing people as it is going lower and many cannot understand why the “fear gauge” is moving lower, but stocks cannot break out higher?  Maybe it is because VIX is not a predictive indicator and only shows what people are willing to pay for potential volatilty.  With everything “priced in” and S&P closing 5 days in a row between 1289 and 1295 and prior to that, closing 5 days in a row between 1277 and 1281.  VIX is falling because volatility is falling and the battle between reality and central bank stimulus seems to be drawing to a dead heat.