Every market day kicks off with news or rumors. Often, the market follows the track it started upon when it opened. In normal times, volatility is the exception, not the rule, so, for the most part, one can expect that as the market opens so it closes.
In the last six months, the market has mostly been steady. Aside from a spike to slightly over 20 in early to mid-June, the VIX (volatility gauge) has ranged between 12 and 17 since March. Since that spike in June, the VIX has steadily held in the 12-14 range since mid-July.
This above is interesting, as in the last week, we have seen the DIJA drop close to 5% and S&P 500 drop some 2.5%. The VIX, however, only rose to a high of 15.9, well within the range of the last six months. Today, it sits at about 14.5. This suggests the market as of late is not as volatile as it seems or as some make it out to be. In fact, it appears fairly steady and the last week simply demonstrates that from time to time, the market will rebalance itself.
The thing that gives it the appearance of volatility is the six days of losses compared to the recent bull run of months. Low volume and a steady diet of news and rumors will do that. The interesting thing is that most all of the recent economic news has been mostly positive.
One of the bits of recent “news” was the “collapse” of the summer retail trade. Walmart missed expectations and the media shouted the retail market was not so good. Then Target came in with decent earnings, but that had little effect on the market. Then, Home Depot and Lowes showed us the home-improvement market is alive and well and the market turned away from the negative. Then, the housing data told us the big-box earnings were real and now the market is showing a forward leaning face, one that seems to like the economic data coming out, even if today’s market is showing a bit of volatility, despite more good economic data.
- Gap Inc. raised its earnings per share outlook for the year on Thursday, after its summer lineup helped boost second-quarter results and advanced its turnaround push. The higher guidance was short of Wall Street expectations, but the company also hiked its annual dividend by 33 percent. The company is the nation’s largest mall-based clothing chain operator, and its results provide insight into consumer spending.
My point is that there is no discernible reason to think the market is moving downward with a strong bias. The economic fundamentals are improving and, ultimately, they trump the fear, as the VIX (fear gauge) has shown over the last six months.
- Asian shares rebounded on Friday as economic data suggesting the global economy is expanding took the edge off persistent fears that the U.S. Federal Reserve will likely start withdrawing stimulus next month.
In the meantime, the breathless media still gives those bears vested in a market a platform from which they can try to manipulate that market to their benefit.
- While lots of speculators have come and gone from this volatile market over the past two years, Peter Schiff says real demand for physical gold has been increasing the entire time, and that’s going to be his salvation for a core holding that’s lost a third of its value.
Mr. Schiff is one of those hilltop screamers who for years now has been shouting the sky is falling. Apparently, he has acted on his own fears by buying gold at prices anyone could see were inflated. Somehow, he saw gold as protection from a Federal Reserve who would destroy the economy with their anti-capitalist policies.
One can check out the reality of his claim that “real demand” for gold is increasing and then play the market according to the facts, or one can follow his strategy, a strategy based on fear, an irrational fear at that. Me? I like the facts.
- Thirty minutes into the crippling outage that hobbled the Nasdaq stock market on Thursday afternoon, stopping all trading in $5.9 trillion worth of U.S. equities, exchange officials had the problem fixed. Another two and a half hours passed, however, before they were ready to flip the switch and turn the all-electronic market back on.
The above is a fact – electronics break down from time to time. The hype and noise about it belies another fact – the NASDAQ trades trillions of dollars and when it has some type of problem, it SHOULD shut down and not open up again until the problem is worked out on all fronts. Let the traders scream.
Trade in the day; Invest in your life …
