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Volatility Climbs as Government Closure Continues

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Volatility Climbs as Government Closure Continues

US stocks faced headwinds at the open, as negotiations over the closure of the government continued to weigh on equity prices. Over the weekend, House Speaker John Boehner warned of the possibility of a default in an interview with ABC Networks. In his view, President Barak Obama and Democrats in Congress are the reason for the government shutdown and should take the blame if the United States were to default on its debt. The major indices closed on their lows with the Dow Industrials down triple digits.

According to Boehmer, “the nation’s credit is at risk because of the administration’s refusal to sit down and have a conversation”. According to the Speaker, “the votes are not in the House to pass a clean debt limit.” “…And the president is risking default by not having a conversation with us…. We’re not going down that path. It is time to deal with America’s problems. How can you raise the debt limit and do nothing about the underlying problem? ”

In corporate news, shares of DryShips (NASDAQ:DRYS) were lower on Monday after the company announced plans late Friday to sell more than $200 million shares on the open market. The company said it may offer and sell its common shares at any time and from time to time through Evercore Group as its sales agent. Sales will be made at market prices prevailing at the time of sale, or at negotiated prices.

Implied volatility increased for the 4th straight trading session climbing to the highest levels seen since mid-June. The VIX is poised to test the 22% level as momentum continues to increase. The MACD (moving average convergence divergence index) is printing in positive territory with an upward sloping trajectory. The RSI on the VIX is approaching the overbought trigger level of 70, printing near 68 which is on the upper end of the neutral range.

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