Wednesday, June 7, 2017

A possible volatility spike ahead

Mid-week market update: So far, the stock market seems to be following Jeff Hirsch's seasonal map of June. The market was strong in the first couple of days, and it has mostly been flat this week. If history is any guide, it should start to weaken late this week.

Evidence is building that of a volatility spike ahead. As volatility is inversely correlated with stock prices, rising vol therefore implies a stock market pullback. The chart below of the ratio 9-day VIX (VXST) to 1-month VIX (VIX) shows that anxiety is rising, but levels are nowhere near where past corrections have bottomed in the past.

Indeed, there are a number of binary events coming up. Thursday will see the ECB meeting, the UK election, and the Comey testimony before Congress. Next week is the FOMC meeting. No wonder the 9-day VIX is rising.

The full post can be found at our new site here.

No comments: