As long as there’s fear in the marketplace, stocks can’t sustain a rally. Investors simply get too scared of holding onto their positions for long periods of time. They think the market might sharply drop again. But if fear is subsiding, then stocks are able to move higher. Investors begin buying on the dips and there’s a willingness to put more money into the stock market.
The stock market has rallied over 20%. Everyone thinks that we’re in the midst of the next ‘suckers rally’. I’m even convinced that the market will head up over the next few months. But the Volatility Index (VIX) is still saying ‘buyer beware’.
If you’ve been following this column over the last month, you’ve likely made some money by shorting the Dow Jones Industrial Average.
Is it just me, or does it seem like there isn’t fear out there? I thought at first that I was just disconnected from what’s happening here in my gorgeous Delray Beach office. Maybe that fact that I’m brewing my own coffee in my own home that isn’t “upside down” on mortgage repayments is skewing my version of reality.
The Dow can drop for a ton of reasons – from business conditions deteriorating to the VIX rallying higher – both of which I’ve discussed before.
Gold may not be the sexiest or most thrilling investment out there. But we don’t invest to entertain ourselves. When the markets go haywire, you need to take action to protect what you have earned.
It’s a widely known that dogs have the capability to sense fear. In that regard, I consider myself a Pit Bull. I can sense fear in the market from thousands of miles away.
The huge downward pressure on stocks is over for now, says Paul Moore. But though investors be thinking about getting back into the market, they must exercise extreme caution. The coming earnings season could reveal some more ugly numbers, while light volume over Christmas can increase market volatility.
This may turn out to be the week options traders have been waiting for. Since this economic crisis began to unfold in early September, the CBOE’s volatility index (the VIX) has soared to record levels. Only recently has the upward pressure begun to wane.
Today, the situation for the VIX is looking quite intriguing. The highly watched index found the momentum to drop below its 50-day moving average. The VIX is currently indicated at 58.93, just below the moving average’s level slightly above the 60 level.
This is only the second time since the end of August the index has traded below its 50-day average. The last time was in late November and the trend lasted for just a few trading sessions.…
Marc Lichtenfeld is convinced we’ll soon have a once-in-a-generation opportunity to buy assets at irrationally low prices. Market conditions are extreme at the moment. But this will pass, eventually, and stocks will recover strongly. Marc gives six reasons why it will soon be time to load up on stocks again.