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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
Nasdaq Trades
25 Oct 14 03:56:53
RT @etfguide: If you're not yet subscribed to @etfguide's YouTube channel, here's what you've been missing: http://t.co/FU7Vuk3C1v $IVV $E…
25 Oct 14 03:26:34
RT @etfguide: If you're not yet subscribed to @etfguide's YouTube channel, here's what you've been missing: http://t.co/FU7Vuk3C1v $IVV $E…
Carolyn B Miciano
25 Oct 14 03:24:12
Bull Put spreads explained with a live trade http://t.co/wpecbKYH97 $VIX $VXX $OEX
24 Oct 14 21:19:23
VXX 33.17 Stock Charts $VXX Barclays Bank PLC iPath S&P 500 VIX Short-Term Futures ETN (NAR) Last Updated: 10/ http://t.co/EG1OxmPIGC
Brody Antenna
24 Oct 14 20:44:13
Check out our very Latest positions $PCLN $AAPL $SPY $MU $FB $NFLX $TSLA $AMZN $GLD $BAC $XLF $VXX $F
24 Oct 14 19:54:56
$VXX Next week will be interesting Sunday ECB out with stress test result. FED will be out on WED IMO 32 to 45 yoyo range possible
24 Oct 14 18:41:08
!IIBEAR $SPY $QQQ $DIA $IWM $VXX http://t.co/LLvMHaCuGc
24 Oct 14 18:36:39
!IIBULL $SPY $IWM $QQQ $DIA $VXX http://t.co/THWAgkFtqk
Eli Mintz
24 Oct 14 17:31:45
@OptionPit I worry that because of the Dec/Holiday effect contango will be muted till the November expiry so less pressure on $VXX
24 Oct 14 16:54:54
RT @etfguide: If you're not yet subscribed to @etfguide's YouTube channel, here's what you've been missing: http://t.co/FU7Vuk3C1v $IVV $E…
24 Oct 14 16:51:12
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
24 Oct 14 16:38:36
$VXX http://t.co/8CJtZGjJ3g
Stephen s
24 Oct 14 16:08:00
RT @IHPosts2: $AUY Bid Size Click Here: http://t.co/1kzOzCNBAk Also See: $NSPH $HPNN $XLY $VXX ~
Robin Feenstra
24 Oct 14 15:56:04
$VXX still trending lower. My target next week $29,50. Earning season is a good one to get this lower. #bearish
Chasing Stars
24 Oct 14 14:19:46
$FREE Day Low Click Here: http://t.co/Eg28aRwIr0 Also See: $ERBB $SVXY $LNKD $VXX ~
Jeff Loesser
24 Oct 14 14:10:26
@CNBCAlex @OptionsAction does it make sense to use a covered call strategy In a product like $vxx which decays due to contango?
Carolyn B Miciano
24 Oct 14 14:10:17
The advantages of Futures trading http://t.co/9M4ezWXVHv $VIX $VXX $OEX
Becky Hiu
24 Oct 14 13:34:16
Maybe reason why $VXX hovered around 33 is just because it's pinning Friday. ;) Underlying stocks across board look awesome! $STUDY
24 Oct 14 13:28:17
RT @VixCentral: $VIX futures contango settled at 0.59% (basically 0). There is no cost to holding $VXX and $UVXY long term. $VXZ has low ca…
tom thumb
24 Oct 14 13:28:10
RT @VixCentral: $VIX futures contango settled at 0.59% (basically 0). There is no cost to holding $VXX and $UVXY long term. $VXZ has low ca…
Eli Mintz
24 Oct 14 13:27:34
$VIX futures contango settled at 0.59% (basically 0). There is no cost to holding $VXX and $UVXY long term. $VXZ has low carrying cost also
24 Oct 14 13:23:48
Our Penny Stock Alerts Gained 371% In 2 weeks! Sign Up For Free Text Alerts For Our New Pick: http://t.co/dLDRavoCi4 $LODE $VXX $RMKR
24 Oct 14 13:15:04
$VXX...see? this is what happens on Friday afternoon when the market rallies. VIX futures send it lower.
24 Oct 14 13:05:18
$SPY $QQQ $VXX - $SPY closes above wkly SMA8 & SMA21 MA's. Shorts will be hoping for Ebola & ISIL attacks over weekend. Sad if this is u.
Becky Hiu
24 Oct 14 13:00:56
$IWM 111 pin! Ha! $VXX 33 or so.
24 Oct 14 12:56:44
likely another $VXX smash into 4:15. It's Friday and no one is afraid of weekend events.
Carolyn B Miciano
24 Oct 14 12:50:50
What kind of trades are good during expiration week http://t.co/yhjCxFr8V3 $VIX $VXX $OEX
24 Oct 14 12:49:47
$vxx imagine the monday morning blow out when there isn't a new ebola case.
Shark Feed
24 Oct 14 12:47:39
$1,300 verified 1 day gain on $VXX http://t.co/IXWRzMSUNw
Joshua Sanchez
24 Oct 14 12:47:38
$VXX Interesting how this is holding up.
24 Oct 14 12:41:25
lame move today on no volume. looking like i'm going to take a 5% hit this week, unless $vxx wants to roll up a dollar in 20 mins...
24 Oct 14 12:39:53
Ebola, long $vxx http://t.co/5IyFpsjUS0
Becky Hiu
24 Oct 14 12:15:31
I think (just think) that another Ebola news thing will surface soon. Odd strength all day in $VXX again. $NLNK accumulation as well.
Al Sabogal
24 Oct 14 12:07:12
$VXX 11/22 expiry: bot the +32p/-30p put spread for 5c credit. Lottery ticket with VXX @ 30 max payout. Can't lose unless VXX below 28
Randy Rye
24 Oct 14 11:56:53
Cash $SPX is +10.77 on a Friday and both $VIX and $VXX are green
raging bull
24 Oct 14 11:52:06
24 Oct 14 11:52:05
$SPY $VXX $QQQ - To the Ebola & ISIL supporting "UnAmericans" short this market today. http://t.co/zFfEnUl8eU
24 Oct 14 11:51:47
$vxx longs trying to walk through rain drops, betting everything on another ebola case.
24 Oct 14 11:38:15
Long $vxx, awaiting daily ebola panic.
24 Oct 14 11:37:46
fear starting to creep back in EOD. will look for a late day selloff. still holding $vxx calls from 30¢ (currently at 9¢).
Thu Real Matt
24 Oct 14 11:27:57
Interesting since wed. $VXX making higher lows as $SPY made higher highs; somethings got to give $VIX
The Fib Trader
24 Oct 14 11:27:34
$VXX where is the new lows?
24 Oct 14 11:09:15
@jucojames call me when $VXX back under 30....
Joe Schmo
24 Oct 14 11:05:32
RT @insidescoop666: $SPY $QQQ $VXX - Cue up "God Bless America" as last of shorts evaporate into the close. If reversal Ebola & ISIL nation…
24 Oct 14 11:02:13
$SPY $QQQ $VXX - Cue up "God Bless America" as last of shorts evaporate into the close. If reversal Ebola & ISIL national anthem will play.
Kevin B. Bantz
24 Oct 14 10:57:52
Commented on StockTwits: Is $NG_F in CONTANGO? Maybe $UGAZ will look like $VXX 2009-2014 $VXX=$7240 ahahaha... http://t.co/yuL125kP3O
Rahuul Matlani
24 Oct 14 10:50:49
$Vxx my view is we should rally soon and $spx and $indu both should tick down
24 Oct 14 10:48:07
$UVXY $VXX $TVIX all green with the indexes
24 Oct 14 10:31:45
$VXX iPath S&P 500 VIX Short Term Futures TM ETN Sees Significant Decrease in ... http://t.co/ncC4aBFHZy
24 Oct 14 10:28:05
bought some #lotto $vxx 34.50 calls expiring today for 30¢
By  +Follow June 27, 2014 12:46PM



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