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Is the Lack of Volatility a Sign of Market Resilience or Apathy?

By  +Follow June 27, 2014 12:46PM
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stock trading volatility, market new record highs, stock market pullback, stock market correction, end of bull marketWhile the market is never short on worries, the ability from traders and investors to consistently shrug off potential headwinds has been somewhat of a surprise in the first half of 2014. In fact, stocks seemed overdue for at least a pullback and a return to more volatile market activity, but that has yet to materialize. In our latest interview with Toni Turner of TrendStar Trading Group, we discuss what the continued absence of volatility is telling us about the current state of the market.

EQ: We’re near the halfway mark for the year, and among some of the bigger surprises this year is the absence of volatility. In fact, volatility is reportedly at a seven-year low. What gives?

Turner: That’s absolutely right. The Volatility index was recently at the lows it hasn’t experienced since 2007, and of course, that number always brings anxiety into the heart of the market. Of course, we have to remember that the VIX represents a measure of the market’s expectation of volatility over the next 30-day period.

Since the S&P 500 just keeps making new highs, the shorts have been repeatedly taken behind the woodshed and I think we’re seeing this market as cheerful, but very apathetic. We haven’t had a headline in a long time that has had the power to scare the market into a 10% correction.

It’s interesting to note that the Dow experiences a bull market correction every 12 months on average. Right now, the Dow is up about 59% from the last correction low of October 2011, and into its 37th month without a pullback.

Still, the bears have been proven wrong, so maybe our complacency right now could also be from their disinterest.

EQ: Earlier this week, revised numbers for Q1 GDP showed a 2.9% decline. The market managed to shrug off the revision with the expectation that the next three quarters would get a nice rebound from the bad winter. But that’s now in question as Q2’s forecast has also been ratcheted down on consumer weakness. Do you think this could manifest into a bigger problem for the rest of the year?

Turner: That may be. Durable goods orders were also down 1% for May, and that’s a more recent report.  We do see last month’s jobs numbers improving, however, the numbers out of the Commerce Department Thursday said inflation is heating up, but consumer spending is flat.

This can be a problem because points to slow growth with rising inflation. That could put a hitch in the stock market’s giddy-up. Of course, it would cause traders and investors to be more selective in stock choices.

EQ: Despite all the possible headwinds to worry about, the market continues to defy bears to keep hitting new highs. Are there any technical levels right now that stand in the way?

Turner: Of course, there’s 2000 on the S&P 500 as a key technical level. Then there’s 2300 is another key level, but we don’t have to worry about that for a while.

Interestingly, I pulled up the monthly chart of the S&P 500, and you can see that the last time the 14-month relative strength index was this overbought was in 2007 and in 1998. That 2007 RSI overbought level also goes for the PowerShares QQQ (QQQ) .

So while this market can certainly go higher in the current low-interest rate environment, once again, I’m suggesting that traders and investors have a plan in case the market decides to take a headwind seriously and profit taking comes in.

EQ: What sectors or industry groups are you watching now?

Turner: Well, because interest rates are falling in the short term—and that dynamic may reverse later in the year—we can look at the iShares US Home Construction (ITB) . Also in the same is the SPDR S&P Homebuilders ETF (XHB) .

I’m looking also at the PowerShares WilderHill Clean Energy (PBW) . I suspect that whether we like it or not, green renewable energy is going to be a definite wave of the future. It’s had some struggles to start, but it’s definitely going to happen. Some of the top components in this ETF are Polypore Intl, Inc. (PPO) , SunPower Corp. (SPWR) , and Calpine Corp. (CPN) .

One of my strategies is to explore  a sector ETF that I think has promise, and either trade that or trade it in concert with some of the attractive stocks within that component list.

 
 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for VXX
Top ETF Funds
27 Aug 14 13:26:55
S&P 2,250 Closer Than You Think.. http://t.co/0jHFovbZxi $VXX #ETF #ETFs #Stocks
Top ETF Funds
27 Aug 14 13:26:38
Call stupid buyer is Done! on $VIX Sonar Report today $VXX.. http://t.co/ZFRlyUKE2E $VXX #ETF #ETFs #Stocks
Top ETF Funds
27 Aug 14 13:26:21
Midday index, ETF option volumes.. http://t.co/HhbLgBTDmI $VXX #ETF #ETFs #Stocks
Top ETF Funds
27 Aug 14 13:26:04
Are Stocks Heading For A Crash This Fall?.. http://t.co/4up7pMWMp3 $VXX #ETF #ETFs #Stocks
jedimarkus
27 Aug 14 13:22:43
RT @VixCentral: $VIX futures contango settled at 6.64% Losses due to contango substantial at these levels for $VXX and $UVXY holders
Eli Mintz
27 Aug 14 13:22:16
$VIX futures contango settled at 6.64% Losses due to contango substantial at these levels for $VXX and $UVXY holders
Top ETF Funds
27 Aug 14 13:15:23
Call stupid buyer is Done! on $VIX Sonar Report today $VXX.. http://t.co/ZFRlyUKE2E $SPY #ETF #ETFs #Stocks
Mike
27 Aug 14 13:02:55
Just one of those days i couldn't get it right :( $ECAU out -2 ticks $DOW calls -.06 $VXX calls out even -comish momo killer day for me lol
Saad Chaudhry
27 Aug 14 12:53:36
I believe a "market God" once stated, when both $SPX and $VXX are showing strength and $IBB / biotechs are pulling back, = start of pullback
Walter Live Oak
27 Aug 14 12:46:23
Long $vxx %10 of portfolio
Leni
27 Aug 14 12:45:00
$VXX 27.88 long Add a little more to mkt hedge as i expect some choppiness and weakness next 1-2 weeks
Millenia Panama
27 Aug 14 12:40:34
From @Forbes Are #Stocks Heading For A Crash This Fall? http://t.co/XS9VQ5Wojv. We are long $VXX $FAZ $TZA $EDZ.
Becky Hiu
27 Aug 14 12:03:05
Sold some $VXX put spreads - just a hedge just incase
Carlos
27 Aug 14 11:59:42
RT @brberis: Are Stocks Heading For A Crash This Fall? $VXX http://t.co/tMNlIwjmBG
TradeTexasBig
27 Aug 14 11:55:00
$VXX entry just turned positive, i expect some give back next week , just a guess..
TV_Trading Ideas
27 Aug 14 11:47:19
$SPY $SDS $TLT $VXX http://t.co/AxqKsw2RNT
A COMPLACENT TRADER
27 Aug 14 11:47:12
'Seeking Safety Plays' are back LONG $VIX $UVXY $VXX $TVIX $TZA AS HEDGE AND SHORT $GLD AS EDGE! $SPY $TQQQ $SMH remains #BULLISH!!!
Mike
27 Aug 14 11:45:39
Added some $VXX calls
Open Outcrier
27 Aug 14 11:44:47
Market under pressure. $SPY $VXX
Beautiful Stocks
27 Aug 14 11:39:33
RT @TradingPulse: @cometkarov beware $VXX has a time decay that can be horripilating
TV_Trading Ideas
27 Aug 14 11:38:53
VXX hourly bullish divergence $VXX http://t.co/3Lh9qGLgPS
Cristobal Barberis
27 Aug 14 11:35:01
Are Stocks Heading For A Crash This Fall? $VXX http://t.co/tMNlIwjmBG
TradingPulseAlpha
27 Aug 14 11:34:18
@cometkarov beware $VXX has a time decay that can be horripilating
buddy madison
27 Aug 14 11:30:36
RT @JakeCatskill: $VXX still moving higher.
Jake Catskill
27 Aug 14 11:30:02
$VXX still moving higher.
A COMPLACENT TRADER
27 Aug 14 11:29:20
$UVXY $VXX re- engage - I dont love it but whtve - looks like a trade/hedge
A COMPLACENT TRADER
27 Aug 14 11:25:47
$VIX $UVXY $VXX $TVIX is appropriate -volatility is not equal to direction $SPY Id rather use capital else where -may pick up a bit will see
Carolyn B Miciano
27 Aug 14 11:07:27
Get started in the markets with this Intro course http://t.co/Bh1HGAF5bK $VIX $VXX $OEX
Ritelink
27 Aug 14 11:02:40
RT @optionmonster: Call stupid buyer is Done! on $VIX Sonar Report today $VXX: http://t.co/1odz76nBwB
Patrick
27 Aug 14 11:00:03
10 - Sentiment Shifted Stocks: $BAC $FXI $DBA $SBUX $MBLY $YELP $CELG $ONE $BIDU $VXX
Investors Hangout
27 Aug 14 10:25:46
jim50: $VXX Open Date=Aug-27-2014 Open=27.72 High=27.89 http://t.co/FVS21GQLeH
Investors Hangout
27 Aug 14 10:25:46
jim50: $VXX Open Date=Aug-27-2014 Open=27.72 High=27.89 http://t.co/aSHPHD6bHx
Ani Anirudhan
27 Aug 14 10:20:36
@1nvestor I hear Putin's think-or-swim options account is having network issues this week $VXX :-)
TV_Trading Ideas
27 Aug 14 10:18:39
$SPY $SDS Keep an eye on this! $VXX http://t.co/doyDlciS5K
Pulsar Investments
27 Aug 14 10:16:20
$SPY $QQQ etc. hover around sideways while investors are buying $TLT $VXX as hedging. Still a boring session controlled by bulls.
Becky Hiu
27 Aug 14 10:14:14
Commented on StockTwits: Think it's just basing out? Selling some puts/spreads ain't too bad an idea...? $VXX http://t.co/pM0AnROfeq
Derald Muniz
27 Aug 14 10:13:24
$VXX has been boring this week. And I appreciate that. lol
Gavin Martinsson
27 Aug 14 10:11:38
$VXX up 21 cents. Awwww that's cute. Keep trying..
jim50
27 Aug 14 10:07:08
$VXX Open Date=Aug-27-2014 Open=27.72 High=27.89 Low=27.59 Close=27.82 Volume=8666966 http://t.co/ANhi8kJISo
Jeffrey Blake
27 Aug 14 10:01:14
$VXX Warnings signs from iPath S&P 500 VIX Short Term Futures TM ETN ... http://t.co/sMPZWkWTPC
Investors Hangout
27 Aug 14 10:00:57
DennyT: BIIB Barchart $BIIB $VXX $MONIF $IYT $SPLK http://t.co/FUhfZ1L890
Investors Hangout
27 Aug 14 10:00:44
DennyT: BIIB Barchart $BIIB $VXX $MONIF $IYT $SPLK http://t.co/oamc1hqDjr
WallStreetHunters
27 Aug 14 09:50:26
Call stupid buyer is Done! on $VIX Sonar Report today $VXX http://t.co/TVRzn0eflv
Minotaur
27 Aug 14 09:42:06
$VIX appears to be bottoming, continues to grind higher recently. $VXX up +0.65% could be ready to pop http://t.co/hjc3VY6zyt
Ariel
27 Aug 14 09:36:06
RT @optionmonster: Call stupid buyer is Done! on $VIX Sonar Report today $VXX: http://t.co/1odz76nBwB
Chasing Stars
27 Aug 14 09:29:05
$QLD Ask http://t.co/ibFVNGRkJF Also See: $SMH $VXX $TLT $JNUG ~
Blair Jensen
27 Aug 14 09:25:59
RT @_TradeFollowers: Traders on StockTwits are expecting volatility to rise. $VIX $VXX $QQQ http://t.co/sQLVuzM3nQ
Market News
27 Aug 14 09:11:00
Call stupid buyer is Done! on $VIX Sonar Report today $VXX: http://t.co/poN3QI2gDh
Options News
27 Aug 14 09:11:00
Call stupid buyer is Done! on $VIX Sonar Report today $VXX: http://t.co/2jAjZQZ0hj via Dr. J $$
Jon Najarian
27 Aug 14 09:10:59
Call stupid buyer is Done! on $VIX Sonar Report today $VXX: http://t.co/1odz76nBwB
				
				
By  +Follow June 27, 2014 12:46PM
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