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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
EcoBizNews
22 Nov 14 12:30:39
RT @tradevolatility: 2015 $VIX Futures Expiration Days And Roll Period Lengths -- $VXX $XIV $UVXY $ZIV http://t.co/THKdkJkRJz
Cutlass
22 Nov 14 12:27:33
RT @Taarriqq: $BABA $GPRO $TSLA $FB $TWTR $SPY $QQQ $VXX $PXD $MPEL $CRM $WYNN How we traded with institutionals, plz share https://t.…
Eternity101
22 Nov 14 12:09:12
RT @tradevolatility: 2015 $VIX Futures Expiration Days And Roll Period Lengths -- $VXX $XIV $UVXY $ZIV http://t.co/THKdkJkRJz
Æther Analytics
22 Nov 14 12:06:27
RT @tradevolatility: 2015 $VIX Futures Expiration Days And Roll Period Lengths -- $VXX $XIV $UVXY $ZIV http://t.co/THKdkJkRJz
Trading Volatility
22 Nov 14 12:05:10
2015 $VIX Futures Expiration Days And Roll Period Lengths -- $VXX $XIV $UVXY $ZIV http://t.co/THKdkJkRJz
kenr0966
22 Nov 14 10:07:54
RT @Taarriqq: $BABA $GPRO $TSLA $FB $TWTR $SPY $QQQ $VXX $PXD $MPEL $CRM $WYNN How we traded with institutionals, plz share https://t.…
OPTIONS/STOCK EXPERT
22 Nov 14 10:07:07
$BABA $GPRO $TSLA $FB $TWTR $SPY $QQQ $VXX $PXD $MPEL $CRM $WYNN How we traded with institutionals, plz share https://t.co/wyClCbbzr3
G. Thomas Lackey Jr
22 Nov 14 09:06:15
"@harmongreg: $SPY Trends and Influencers November 22, 2014 - Dragonfly Capital http://t.co/0gDZxTEz6F $IWM $QQQ $VXX $TLT $EEM $GLD $USO "
Greg Harmon, CMT
22 Nov 14 08:49:21
$SPY Trends and Influencers November 22, 2014 - Dragonfly Capital http://t.co/zeDejU1iql $IWM $QQQ $VXX $TLT $EEM $GLD $USO $UUP $SSEC $VIX
Unrelated Nonsense
22 Nov 14 07:55:08
@georgepearkes @largecaptrader1 @BarbarianCap like levered $VXX. Brillz.
Payam Zamani
22 Nov 14 06:03:39
RT @JackDamn: MarketSci’s Mean-Reversion $VIX Trading Strategy http://t.co/zr6bM6jtCN System analysis by VMS. $VXX $XIV http://t.co/hPjVqKz…
Anmol Singh
21 Nov 14 18:41:26
Made today's Video Newsletter free so you can get a taste $STUDY $TLT $BTU $VZ $VXX $SPY $XLE $FB $TRUE $EWJ $GLD http://t.co/xCRB7hm573
Anmol Singh
21 Nov 14 18:40:06
Made today's Video Newsletter free so you can get a taste $STUDY $TLT $BTU $VZ $VXX $SPY $XLE $FB $KATE $TRUE $EWJ $GLDhttp://goo.gl/oDsRt7
Stockaholics
21 Nov 14 17:24:43
578% Gains On Penny Stocks in one month! Plus a New Pick Is Coming: http://t.co/2W3yKD2d5Q $LODE $VXX $RMKR
Richard Gobel
21 Nov 14 14:17:40
KirkSpano : I like the look of the stair-step higher in the $VXX that my algo number is displayin... http://t.co/BJSNouA2vM via Scutify
Jean Fonteneau
21 Nov 14 14:13:59
@CNBC FMHR "traders" really really nice this week: Long $GPRO in front of 2ndary, long $VXX - GoPro headed to $90? http://t.co/yG2tiXk7co
brian stu
21 Nov 14 13:38:03
RT @VixCentral: $VIX futures contango settled at 7.36% It is expensive to hold $VXX and $UVXY long term. If current trends continue, contan…
ARENA BURSATIL
21 Nov 14 13:36:51
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Rich
21 Nov 14 13:31:18
RT @VixCentral: $VIX futures contango settled at 7.36% It is expensive to hold $VXX and $UVXY long term. If current trends continue, contan…
Eli Mintz
21 Nov 14 13:28:15
$VIX futures contango settled at 7.36% It is expensive to hold $VXX and $UVXY long term. If current trends continue, contango>10% is likely
WallStreetStar
21 Nov 14 13:15:24
Nice day for Brazil stocks, $EWZ up almost 7%. Next week I am short $AAPL and $QQQ. Long $USO $VXX. I may get long $TWTR as well.
Helyn Bolanis
21 Nov 14 13:00:50
#timestamp Sold $VXX for PAMS 2 at $27.62
TRADING THE ODDS
21 Nov 14 12:51:40
Trading Volatility (#VRPStrategy) on Fri., 11/21/2014 : Long $XIV closed, switch to $VXX (market-on-close). http://t.co/VaqWnlQjDj
wsmco
21 Nov 14 12:51:27
Sold to open $VXX Dec 5 27 puts at .57
Agent Blowfish
21 Nov 14 12:28:25
Sold last third of $XIV at 38. Around 3% profit. All out of XIV now. $VIX $VXX
TV_Trading Ideas
21 Nov 14 12:25:02
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Iskounta
21 Nov 14 12:25:02
$SPY chart: $SDS $VXX $IWM I will ask you again!. http://t.co/6XIGeCMMyH
Main Street Alpha
21 Nov 14 12:23:25
Moving the $VXX Nov28 $28C entry to .44 from .48
Zero Filter
21 Nov 14 12:13:05
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Investors Hangout
21 Nov 14 12:12:08
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Investors Hangout
21 Nov 14 12:12:05
lookn4wins: VXX 27.88 Stock Charts $VXX Barclays Bank PLC http://t.co/0iq9MgHwCX
iHangout
21 Nov 14 12:08:41
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lookn4wins
21 Nov 14 12:04:23
VXX 27.88 Stock Charts $VXX Barclays Bank PLC iPath S&P 500 VIX Short-Term Futures ETN (NAR) Any opinions on V http://t.co/lNbpJrM8U1
Jack Damn
21 Nov 14 12:02:20
MarketSci’s Mean-Reversion $VIX Trading Strategy http://t.co/zr6bM6jtCN System analysis by VMS. $VXX $XIV http://t.co/hPjVqKzTon
TV_Trading Ideas
21 Nov 14 11:58:44
$SDS $IWM $VXX All day they are selling to you! $SPY http://t.co/bGU5AbuNkY
Iskounta
21 Nov 14 11:58:44
$SPY chart: $SDS $IWM $VXX All day they are selling to you!. http://t.co/W1R9QrzrnI
TV_Trading Ideas
21 Nov 14 11:54:09
$IWM $SDS $VXX This hurts! $SPY http://t.co/6T39QSO1wE
Iskounta
21 Nov 14 11:54:09
$SPY chart: $IWM $SDS $VXX This hurts! . http://t.co/GpmcV3Vfna
TRADING THE ODDS
21 Nov 14 11:51:26
Trading Volatility (#VRPStrategy) on Fri., 11/21/2014 (preliminary estimate): Long $XIV closed, switch to $VXX (market-on-close).
TV_Trading Ideas
21 Nov 14 11:43:23
$IWM $SDS $VXX Where do you want to go? $SPY http://t.co/I0LUnKrnpw
Iskounta
21 Nov 14 11:43:23
$SPY chart: $IWM $SDS $VXX Where do you want to go?. http://t.co/NYhmasdWW4
Old Dog New Tricks
21 Nov 14 11:37:50
Rolled 40 x $VXX Dec 12 29 C in/down to Nov 28 29 C @ .69 DB
Old Dog New Tricks
21 Nov 14 11:37:22
Rolled 10 x $VXX Dec 12 29 C in/down to Nov 28 29 C @ .67 DB
Old Dog New Tricks
21 Nov 14 11:36:58
Rolled 10 x $VXX Dec 12 30 C in/down to Nov 28 28.5 C @ .37 DB
Stockaholics
21 Nov 14 11:25:19
578% Gains On Penny Stocks in one month! Plus a New Pick Is Coming: http://t.co/2W3yKD2d5Q $LODE $VXX $RMKR
Mathew Humphries
21 Nov 14 11:06:52
RT @BlockTradeAlert: BLOCK TRADE: $VXX 500,000 shares @ $27.90 [14:05:50]
BlockTradeAlert
21 Nov 14 11:05:50
BLOCK TRADE: $VXX 500,000 shares @ $27.90 [14:05:50]
Eternity101
21 Nov 14 11:04:01
RT @selling_theta: $VXX still deep red because of what DEC $VIX did from 4-4:15 yesterday. This happens a lot. You must understand VIX mo…
TV_Trading Ideas
21 Nov 14 10:54:37
$SPY $SDS $VXX This candle is a bad candle! $IWM http://t.co/1IpY0aRi62
Iskounta
21 Nov 14 10:54:37
$IWM chart: $SPY $SDS $VXX This candle is a bad candle!. http://t.co/CIlEYLwqJu
				
				
By  +Follow June 27, 2014 12:46PM
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