There was a time, not too long ago, when a VIX (option volatility index) reading of 30 was a decent buy signal. Barrons is reporting (article) that VIX is recording new highs and that 5% daily moves are now priced in. The Barrons headline is "Rockier than 1929," so yet another Great Depression era analogy for the stock market.
From the article:
>>
"During 1929, realized volatility peaked at 68%. We will likely pass that number in short order. That will make the current market the highest sustained volatility environment in S&P 500 history," says Goldman's Krag "Buzz" Gregory, an options strategist.
...
VIX at 80 implies a Standard & Poor's 500 average daily move of about 5%.
>>
Elsewhere, gold pops back up above $800. I am skeptical of the move because I think much of last week's trade was related to options expiration. Sometimes it all unwinds the other way, the week after. The last quarter of the year, and January tend to be good times for gold bulls. However, this info seems widely known now, so I don't know how useful it is anymore. Anything that is widely known, tends to already be in the price.
That is why markets are tough, everyone is looking for an edge, and when a good edge is found, the info spreads quickly. If the info is easy to find such as yearly calendar, or time of day, or day of week tendencies, it gets jumped. Because of this, I rate seasonal indicators or other time related indicators among the least reliable technical tools.
It will be interesting to see how much tax selling occurs in stocks this December. A good many folks have likely already gone over the maximum deduction of $3000 per year for capital losses, so it may be less than usual.
No comments:
Post a Comment