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Showing posts from March, 2017

S&P Below Support - Finally...

For just the fourth time since the election, the SPY has closed below the 20 day support level - which has been rock solid until now.  There is a good size gap to the next support level with the 50 day currently at $232.  It will be interesting to see if the market finally gets a little volatility for the first time since October/November.

Convexity as a Technical Indicator - Applications of the Second Derivative...

WHAT'S IN A NAME? In investment parlance, the term 'convexity' is typically reserved for the topic of fixed income risk; especially in regards to debt with embedded optionality where negative convexity is a prominent pricing factor.  However, it is important to recall that 'convexity' (or 'concavity', for that matter) is a mathematical measurement used to describe the second derivative of a continuous, nonlinear function on an interval. The issue with confining the term to a single connotation is that - for better or worse - investment tools have become increasingly nonlinear since the days of the 60/40 model and convexity is present in a number of applications.  The extent to which it has been circumscribed to a single asset class is evident in equity option jargon where the second derivative of the pricing function is called 'gamma' instead of convexity.  Of course, the argument could be made that the principle purpose of option vernacular is to c