"IF YOU THINK THIS IS OVER THEN YOU'RE WRONG"
Separator, Radiohead
Welcome volatility, we've been expecting you!
The markets have gotten their first taste of volatility since 2011 but these moves we've seen these past few days felt more like this time of year in 2008. 1,000 point swings on the Dow and the VIX spiking up to 45+... it's enough to make a grown man cry... and that likely happened too.
For anyone who has followed this blog, this all comes as no surprise... the only surprising thing was how long it took to finally get here.
Where we're at now, from a technical standpoint anyway, is in a pattern I call the 'reversion trade.' When prices exhibit large variances from their moving averages, they will almost always do so with spikes in momentum factors. Once those momentum factors settle down, prices have a tendency to revert back toward their moving averages.
A large variance for an index ETF like the SPY would be a reading of 2.00... the variance on Monday was over 10. Now that the negative momentum had ebbed, we saw a big reversion as indices recouped almost 4% today alone.
This does not mean that the selling is necessarily over, however. We are still in the early stages of bearish technical patterns which have a tendency to be accompanied by more bouts of volatility.
Separator, Radiohead
Welcome volatility, we've been expecting you!
The markets have gotten their first taste of volatility since 2011 but these moves we've seen these past few days felt more like this time of year in 2008. 1,000 point swings on the Dow and the VIX spiking up to 45+... it's enough to make a grown man cry... and that likely happened too.
For anyone who has followed this blog, this all comes as no surprise... the only surprising thing was how long it took to finally get here.
Where we're at now, from a technical standpoint anyway, is in a pattern I call the 'reversion trade.' When prices exhibit large variances from their moving averages, they will almost always do so with spikes in momentum factors. Once those momentum factors settle down, prices have a tendency to revert back toward their moving averages.
A large variance for an index ETF like the SPY would be a reading of 2.00... the variance on Monday was over 10. Now that the negative momentum had ebbed, we saw a big reversion as indices recouped almost 4% today alone.
This does not mean that the selling is necessarily over, however. We are still in the early stages of bearish technical patterns which have a tendency to be accompanied by more bouts of volatility.
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