Posts filed under “Technical Analysis”

Death of Volatility

Light posting this weekend, but I came across two fascinating VIX graphs that demanded discussion.

The VIX, for those of you who may not be aware, is a function of option trading that deduces the "implied volatility" in the markets. 

The first graph is from BCA Research, and it shows the VIX over the past 15 years:


Courtesy of BCA Research


I read this as the VIX — eventually — becoming an attractive buy; I envision this scenario: the VIX spikes up to 13-14, before it runs into technical resistance; then as the market makes one last move upwards, it slides under 10. To me, the ideal entry point would be towards 8-9.

Those interested in seeing how the VIX trades should look at either the options (VRO) or futures (VBI).

Floyd Norris wonders if its due to "an excess of capital that feels it has nowhere to go but stocks. Individual stocks can still soar or collapse based on good news or bad, but money taken from one stock seems to flow to another, cushioning the daily movement of market indexes."

In today’s NYT, he writes:

"Back around the turn of the century, it seemed as if nearly every other day was an exciting one in the stock market, and not just in the United States.

At the peak of volatility in the United States, from 2000 to 2002, the Standard & Poor’s 500 showed a daily gain or loss of at least 1 percent for two days a week or more. And it was far from the most volatile market. In Germany in 2002, the average week had three big days.

But volatility began to dip in 2003, fell sharply in 2004 and absolutely tumbled in 2005. In the United States, there were 52 days in 2002 when the index showed a move of 2 percent or more – an average of one a week. That fell to 15, little better than one a month, in 2003. And there has not been one such day in the last two years.

The accompanying charts show that in Britain, Germany, France, Japan, Hong Kong and the United States, the amount of stock market volatility in 2005 was at the lowest level since at least 1996."

The chart included covers many of the major indices in the world:


click for larger graphic


Courtesy of NYT


The Year Of Living Complacently
BCA Research, 09:54:00, December 20, 2005

Don’t Hold Your Breath for an Exciting Day in the Stock Market
FLOYD NORRIS, Off the Charts
NYT, December 31, 2005

Major World Index VIX graphic

Category: Markets, Psychology, Technical Analysis, Trading

P/E vs S&P 500 (50 Years)

As promised, today brings us to the 4th in our series of charts: P/E vs S&P500 click for larger chart courtesy of Mike Panzner, Rabo Securities > I’ll get into the significance of what this means to the markets later, but for now, note where the P/E is over the median, and its impact on…Read More

Category: Earnings, Markets, Psychology, Technical Analysis

2 Studies on the Flattening Yield Curve

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation, Technical Analysis

Alaska is Melting . . .

It seems that the melting polar ice is becoming more of a concern to Alaskans than those of us in the lower 48. click for larger graphic courtesy of  Anchorage Daily News > Thank goodness there’s no Global Warming — imagine how much more of Alaska would be melting if there was! > See also:…Read More

Category: Science, Technical Analysis, UnScience

100 Year Dow Jones Industrials Chart

Have a look at this 100 year (actually, 105-Year) chart. I colored each “Market” appropriately — Green for Bull, and Red for Bear — to more clearly show what happens. Bull markets get ahead of themselves. At their ends, they tend towards excesses that take a very long while to recover from. When a long…Read More

Category: Markets, Psychology, Technical Analysis

4 Year Presidential Cycle

This is the first of 4 charts I plan on revealing this week. Each one will hopefully shed some insight into what we may expect in 2006. This chart shows what is known as the 4 year or Presidential Cycle. The theory behind this is that U.S. markets have a tendency to make a high…Read More

Category: Markets, Technical Analysis

Inverted Yield Curve: Its different this time (not)

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation, Technical Analysis

Activity Afoot in Rove Indictment Futures

Category: Politics, Technical Analysis

Global Weather Volatility is a Strong Buy (Short UnScience)

Category: Science, Technical Analysis, UnScience

Gold Yearly Data Analysis

Category: Commodities, Inflation, Technical Analysis