US equity markets continue to be driven by positive earnings and economic data.  Last week’s weaker than expected 4th quarter GDP data along with Tuesday’s disappointing consumer confidence was offset by Wednesday in line ADP employment report.  The news also continues to focus on the future IPO of Facebook, which seems to be helping the internet and technology sector.  The S&P 500 Index continues to move higher driven by the S&P 500 technology index which has hit a multi-year high.

Wednesday’s better than expected ISM manufacturing index is generally highly correlated with the S&P 500 index.  The ISM’s index increased to 54.1 in January from a revised 53.1.  Economists surveyed had expected the January PMI to increase to 54.0.  The ISM’s new orders index rose to 57.6 which is the highest reading since April 2011.  The increasing level of this barometer should be positive for the S&P, but negative for implied volatility.

Meanwhile, implied volatility on the major indexes continues to trade in a tight range as fear over Europe and a potential debt default has somewhat abated.  The EU continues to meet with Greece to determine the fate of private investors in Greek debt.  The soft default is the most likely scenario, but any pullback by the parties involved will likely take the VIX to higher levels.

After edging higher early in the week, the VIX volatility index, which measures the implied volatility of the “at the money” strikes of the S&P 500 Index, has declined back through 20%, and is poised to test support levels near 17.5%.  With the “death cross” occurring last week, were the 50-day moving average of the VIX crosses below the 200-day moving average of the VIX, downward momentum in the volatility gauge is likely to continue.

Polypore International, (NYSE:PPO), was the largest of the implied volatility movers during this current week.  The stock price plunged 26% as Axiom Securities initiated coverage with a sell rating and a $26 price target.  The implied index mean of PPO increased to 90%, from 69%, which is a 31% change.  Implied volatility spiked to 112% before coming off, and was as low at 47% last week.

Kinder Morgan (NYSE:KMI) also experienced a large change in implied volatility this week, moving to 27% from 23% one day ago.  Historical volatility on the stock is printing near 23.81, but has been as low as 17.7 using the historical range method.

Commodity implied volatility continues to be lead by natural gas Henry Hub, despite the incredible decline in natural gas prices that the market has witnessed over the past few months.  Natural gas prices have broken through the 2.5 per mmbtu level, but still boasts and implied volatility level of 64%.    Silver futures implied volatility is also relatively high, reflecting a level near 46%.  Frozen concentrated orange juice is also high near 46.3%.

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