If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.
While it’s too soon
to declare the bull market dead and a new bear market starting, given the duck
test, rising interest rates, and that it was "dress up month-end, that’s probably the way to bet.
Looks like “sell in May, go away,” came early this year.
The race is not always to the
swift, nor the battle to the strong, but that's the way to bet.
Damon Runyon
The simple reason the Dow snapped a 9-quarter win streak: Wall Street’s surging ‘fear index’
Published: Mar 29, 2018 5:24 p.m. ET
The Dow and the S&P 500 halted a record-setting streak of quarterly wins
at nine, and the clearest reason why may be explained by the VIX index, widely
known as Wall Street’s “fear gauge.”The Dow Jones Industrial Average DJIA, +1.07% posted a quarterly decline of more than 2.3%, snapping the longest streak of quarterly gains for the blue-chip average since an 11-quarter rally that ended in the third quarter of 1997. The S&P 500 index SPX, +1.38% booked a 1.2% quarterly fall, ending its longest such stretch since the first quarter of 2015.
Read: The Dow’s streak of quarterly gains is at risk of ending at nine
There are perhaps a host of reasons for the surcease of such a lengthy bullish run for the most prominent equity benchmarks: The Federal Reserve’s normalization of monetary policy, with the central bank lifting rates for the fifth time this month since December 2015; Intensifying uncertainty in the makeup and agenda of President Donald Trump’s administration, underscored by a number of high-profile departures; and the intensification of trade-war fears, after the president imposed duties on steel and aluminum imports and leveled more targeted tariffs at the world’s second-largest economy: China.
However, the surge in the Cboe Volatility Index VIX, -12.68% is perhaps the most correlated with the market’s downtrend. According to WSJ Market Data Group, the VIX posted its biggest quarterly rise, up more than 80% (on a preliminary basis) since it jumped in the third-quarter of 2011following Standard & Poor’s historical downgrade of the U.S. credit rating and worries about Europe’s debt-crisis jitters.
The VIX reflects option traders’ collective expectations for S&P 500 volatility in the coming 30-day period.
Much had been made about the gauge’s subdued readings over the previous 18 months, a period that ended when the index surged 115% on Feb. 5.
Since that period of unnatural calm came to an abrupt end, the index has climbed to trade near its historical average around 19 or 20.
----Of course, its hard to say if the VIX is driving stock
moves or if the decline in stocks represents a shift in the volatility dynamic.
But one thing is certain: a stretch of extraordinary placidity is over.
VIX Up 81% Shows Extent of Stock Market Pain in Jarring Quarter
By Elena Popina, Sarah Ponczek, and Lu Wang
Are we
having fun yet?
For two
years traders bemoaned the tranquility in global equity markets. That era just
ended in a fit of turbulence, as stocks plunged into the first correction since
early 2016 and volatility almost doubled from historically low levels over the
past three months. Dip buying no longer worked, and holding tight on the
S&P 500 Index delivered the first quarterly loss in 2 1/2 years.
With the
White House spoiling to reorder the global trade hierarchy and the Federal
Reserve raising interest rates, the word on Wall Street is: get used to the
swings.
“Think about
all the waves and stress caused on the surface of the water when a boat is
changing directions,” said Michael Cuggino, president and portfolio manager at
the Permanent Portfolio Family of Funds in San Francisco. “You have a
transitory period of changing directions in monetary policy and growth
expectations. As investors try to sort through that, that creates volatility.”
Even though most of the market’s worries can be countered -- after all, interest rates are meant to go up sometimes, stocks are meant to go down sometimes -- the handwringing is amplified by the torpor that came before. The S&P 500 gained or lost 1 percent in a single day 23 times this quarter; in most of 2016 and 2017, it went for months without a single such move.
The 81 percent jump in the Cboe Volatility Index tells the story of a quarter when stocks went from euphoria to correction in a matter of weeks. Optimism over Donald Trump’s tax cuts triggered unprecedented inflows into U.S equity funds in January as the S&P 500 jumped the most in 22 months. Then, a popular short volatility trade blew up, triggering a 10 percent correction that wiped $2 trillion from U.S. stocks.
More
Here’s how the stock market’s performance stacks up over the week, month and quarter
Published: Mar 29, 2018 4:31 p.m. ET
With the U.S. stock market closed
on Good Friday, Thursday’s closing bell not only marks the end to the
latest week of trading on Wall Street, but the close of March and the first
quarter of 2018.All of those time periods have featured some of the sharpest volatility in stocks in years, and the sharp swings back and forth—sometimes in the same session—may have market watchers confounded about the latest trends. Here’s how the major indexes have performed.
Weekly performance:
• The Dow Jones Industrial Average DJIA, +1.07% gained 2.4% this week.
• The S&P 500 SPX, +1.38% is up 2% this week.
• The Nasdaq Composite Index COMP, +1.64% rose 1%, turning positive for the week with Thursday’s gain of 1.6%.
• The Russell 2000 index RUT, +1.08% of small capitalization shares rose 1.3% over the week.
All four indexes are coming off a two-week decline.
Monthly performance:
• The Dow lost 3.7% over the month of March, its second straight negative month, although February’s drop was steeper—down 4.3%. The longer-term uptrend has been positive, however, as February’s drop followed a 10-month rally, which had been its longest such streak since 1959.
• The S&P fell 2.7% in its second straight monthly decline.
• The Nasdaq fell 2.9%. Like the Dow and the S&P, this is its second straight monthly decline, although it is also its biggest monthly drop since January 2016.
• The Russell rose 1.1% over the month.
Quarterly performance:
• The Dow is down 2.5% over the first quarter, putting an end to a nine-quarter streak of gains, its longest such rally since an 11-quarter rally that ended in the third quarter of 1997.
• The S&P 500 is down 1.2% for the first quarter, and the benchmark index also put an end to a nine-quarter rally. However, that was only the longest such streak since one ending in the first quarter of 2015.
• The Nasdaq is up 2.3% over the first quarter, its seventh straight quarterly gain, its longest such streak since a 10-quarter rally that ended in 2015.
• The Russell is down 0.4% over the first quarter. This puts an end to a seven-quarter streak of gains, its longest since an eight-quarter stretch ending in the second quarter 2014.
The monthly Coppock Indicators finished March.
DJIA: 24,103 +272 Down 10.
NASDAQ: 7,063 +300 Down 13. SP500: 2,641 +202
Down 10.
All
three slow indicators moved down in March. For some a new bear signal, for others a take
profits and get back to cash signal.
DJIA. Buy:
29/7/16 - 18,432. Sell: 29/3/18 – 24,103.
SP500. Buy: 29/7/16 –
2,174. Sell: 29/3/18 – 2,641.
NASDAQ. Buy: 29/7/16 – 5,762. Sell: 29/3/18 – 7,063.
I long ago came to the
conclusion that all life is 6 to 5 against.
No comments:
Post a Comment