Monday, 16 April 2018

Stock Market: A Return to Calmer Waters

The wild market price action that accompanied the correction since start of Feb has subsided in recent days.

I find it interesting that while the major market indices are down on Friday (13/3), VIX also went down. This (but not this alone) suggests a bullish bias in the market. Also the VIX breaks down below the rising trend line since the start of the year. While this occurs on Thursday (12/3), its decline continued on Friday.

Of course, the ongoing earning releases could change this bias if they’re continued to disappoint (although i don't expect that. Will see).

VIX showing break down from rising trend

In addition to the VIX's break down on last Thursday as shown in the chart above. Even without the chart, something happened (or didn’t happen) tells me that last Thursday is a turning point from jittery to relative calm in the market.

Last Wednesday, there were 4 market moving headlines (Russia geopolitical tension, FBI's raiding of Michael Cohen office, Paul Ryan resignation, and Syria attack) in ONE DAY. Yep, 4 big headlines in 1 day. Not to mention FOMC. And yet, the market was flat.

So the market had decided last Wednesday to stop reacting to headlines and start to focus on earnings. If this news occurred just a few days earlier, the market would tank on these headlines.

Side note: The rising trend in VIX in the month of January (as the market went up) should warn people to get out of the market. And likewise, the falling trend in VIX right now should tell investors that the bottom is in. So keep an eye on this VIX trend.

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