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

By  +Follow June 27, 2014 12:46PM
Tickers Mentioned:

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
Antonio NaVi
22 Oct 14 20:37:01
$VXX actuando sobre los mercados en rebote en la primera mitad de sesion ahora se encuantra cerca de SMA200 en 36.06 http://t.co/KUHGwBAJYH
Wall Street Forecast
22 Oct 14 20:16:33
$VXX -- The red line wins again. http://t.co/ybeHopQ3So
22 Oct 14 19:50:19
RT @biostock: $VXX $BABA $YHOO Most China Stocks Fall as IPO Concern Overshadows Flash PMI Data http://t.co/uZntOx0t1O
Joshua Hayes
22 Oct 14 19:40:29
Near Distro Day Spells Trouble For Confirmed Rally http://t.co/dmzcnwFYoE $STUDY $COMPQ $RUT $SPX $NYA $DJIA $NDX $VIX $TVIX $UVXY $VXX $XIV
Joshua Hayes
22 Oct 14 19:40:26
Near Distro Day Spells Trouble For Confirmed Rally http://t.co/mCsu3XdrY6 $STUDY $COMPQ $RUT $SPX $NYA $DJIA $NDX $VIX $TVIX $UVXY $VXX $XIV
22 Oct 14 19:21:28
$VXX $BABA $YHOO Most China Stocks Fall as IPO Concern Overshadows Flash PMI Data http://t.co/uZntOx0t1O
22 Oct 14 18:47:30
$YHOO $BABA $VXX China HSBC PMI 50.4 Market might disappoint itself on no easy money
IH News Desk
22 Oct 14 18:09:38
$IDGC Message Board Posts Click Here: http://t.co/6zJaBwaN9H Also See: $HVU.TO $VXX $IBM $WAFR ~
22 Oct 14 18:02:32
$VXX Contango from last week got settled AH Today's event changed course. HSBC China PMI could spook market tomorrow (more trustworthy data)
22 Oct 14 17:49:43
3 month #VIX short term $VXX vs long term futures $VXZ for bear Aug 12th #volatility repeat move in $TVIX $UVXY http://t.co/eIEpfcAHsI
22 Oct 14 16:51:11
If you're not yet subscribed to @etfguide's YouTube channel, here's what you've been missing: http://t.co/FU7Vuk3C1v $IVV $EFA $VXX $IWM
Stock Relay
22 Oct 14 16:47:43
$AXY.TO Quotes Click Here: http://t.co/NVQ6vHCQsx Also See: $IBB $SPXS $FVI.TO $VXX ~
Carolyn B Miciano
22 Oct 14 16:01:31
The detailed guide to understanding Implied Volatility http://t.co/fnTx4zV3wV $VIX $VXX $OEX
Langan Stocks
22 Oct 14 15:45:09
$EPGL Last Trade Click Here: http://t.co/EIzKxTpP7p Also See: $BBRY $VXX $T $APA ~
Becky Hiu
22 Oct 14 14:56:06
Bullish engulfing $VXX off 32 level http://t.co/2q7cLvIjw0
22 Oct 14 14:35:14
@SunriseTrader what do you think about where $iwm topped today retested the weekly neckline then bearish engulfed with $vxx bullish engulfed
22 Oct 14 14:06:03
I was wrong...November $VIX got smashed into 4:15, pulling $VXX way down.
Scott Redler
22 Oct 14 14:01:55
Awesome :) “@CraigMiera: Had one of the best days of my year today. We have a great community at T3. $VXX @SperlsT3 @RedDogT3”
Craig Miera
22 Oct 14 13:59:45
Had one of the best days of my year today. We have a great community at T3. $VXX @SperlsT3 @RedDogT3
22 Oct 14 13:56:12
RT @TheOptionDon: Moment of Caution {VIDEO} http://t.co/psNzJHIehq $SPY $TZA $VXX $AAPL $GOOGL $TWTR
Rupam Shrivastava
22 Oct 14 13:53:07
RT @VixCentral: $VIX futures contango settled at -0.28% (basically 0) There is no long term cost for holding $VXX or $UVXY
22 Oct 14 13:49:11
RT @VixCentral: $VIX futures contango settled at -0.28% (basically 0) There is no long term cost for holding $VXX or $UVXY
Schaeffer's Research
22 Oct 14 13:43:42
RT @VixCentral: $VIX futures contango settled at -0.28% (basically 0) There is no long term cost for holding $VXX or $UVXY
22 Oct 14 13:40:06
RT @VixCentral: $VIX futures contango settled at -0.28% (basically 0) There is no long term cost for holding $VXX or $UVXY
Eli Mintz
22 Oct 14 13:39:55
$VIX futures contango settled at -0.28% (basically 0) There is no long term cost for holding $VXX or $UVXY
Aaron Levitt
22 Oct 14 13:38:48
RT @fabiancapital: NEW POST: Are You An Investor Or Trader? http://t.co/yyv4cDkewu $SPY $VXX $STUDY
TV_Trading Ideas
22 Oct 14 13:22:39
Rising VIX $VXX http://t.co/fq6Amb2taQ
Dr. Stoxx
22 Oct 14 13:22:18
Yup, good time to buy volatility and sell momentum. Got $VXX? $QID? $ERY?
Seeking Alpha
22 Oct 14 13:20:30
Not All Market Hedges Are Created Equal: Part 1 http://t.co/NYQorMxAaw $VXX $UVXY $TVIX $XIV $SVXY $VIXY $ZIV $VXZ $VIXM $CVOL $VIIX $XVZ
22 Oct 14 13:07:31
I probably should have bought an initial position again in $VXX today.we'll see what tomorrow looks like
Mark Mansfield
22 Oct 14 13:01:53
I guess I should have kept my $VXX longer. Oh well... gotta take profits always.
FMD Capital
22 Oct 14 13:01:09
NEW POST: Are You An Investor Or Trader? http://t.co/yyv4cDkewu $SPY $VXX $STUDY
22 Oct 14 12:58:38
$VXX will look to buy Dec puts tomorrow if it continues to rise. Already bought Jan puts.
22 Oct 14 12:58:31
Mag Wilde
22 Oct 14 12:58:24
$SPX gettin' $VXX 'd
22 Oct 14 12:57:23
$V wee bit like the $vxx as well as others here not sure how high how fast
22 Oct 14 12:55:35
Looks like I just decided to sleep on the $VXX posn's another night. I know, I know...
22 Oct 14 12:53:27
Moment of Caution {VIDEO} http://t.co/psNzJHIehq $SPY $TZA $VXX $AAPL $GOOGL $TWTR
TV_Trading Ideas
22 Oct 14 12:52:16
$SDS $VXX This is my gift to you! $SPY http://t.co/RyfCdEvgZY
22 Oct 14 12:52:16
$SPY chart: $SDS $VXX This is my gift to you!. http://t.co/UfDgkT4ldo
TV_Trading Ideas
22 Oct 14 12:49:42
$SDS $VXX This is my gift to you! $SPY http://t.co/6z9sg6VZlk
22 Oct 14 12:49:42
$SPY chart: $SDS $VXX This is my gift to you! . http://t.co/EgTEqiCWun
Robin of the Hood
22 Oct 14 12:47:31
$XIV just not the guarantee it has been for the past 2-3 years, be careful for now if you are playing with this instrument. $VXX
Becky Hiu
22 Oct 14 12:45:31
22 Oct 14 12:44:12
@Delta__Neutral but $VXX only cares about front 2 months...that's what I'm referring too. should have been more precise.
Kym L
22 Oct 14 12:42:39
$VXX bullish engulfing
Helyn Bolanis
22 Oct 14 12:42:01
Yikes! Mistyped. 35.25$ not 32.25 $VXX
Helyn Bolanis
22 Oct 14 12:40:59
$32.25 resistance for $VXX Aug 7th HOD Oct 13th open. Somebody likes that number
22 Oct 14 12:40:18
$VXX new high without $ES_F new low. BACKWARDATION
Becky Hiu
22 Oct 14 12:39:13
Commented on StockTwits: Yep. Long $VXX since I mentioned it best trade today up 80c/contract already http://t.co/0t4OD7XwT6
By  +Follow June 27, 2014 12:46PM



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