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Volatility and Interest Rates

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Why is the VIX spiking now?  Because now is when it is supposed to do that.

Volatility and interest rates have an interesting relationship, going back many years.  Higher interest rates pull money away from the stock market, and thus make it so that prices have to travel farther to find liquidity, after a positive or negative stimulus.

The word “volatility” gets thrown around a lot in our business.  We should all remember that it gets borrowed from the world of chemistry.  It refers to... Read More

Stock Market In a Rogue Wave

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The stock market is just coming out of a big rogue wave event.  And that gives us clues about what lies ahead.

The term “rogue wave” gets used in other areas of science, most notably in analysis of big waves in the ocean.  But they can occur in any medium where wave action is present, not just the ocean.  They have even been observed in the transmission of light waves through fiber optic cables.

Rogue waves in the ocean get a lot of attention, especially from ship designers who need to... Read More

Big Change In Bull-Bear Spread

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The latest data from Investors Intelligence showed a huge change this week.  Bulls dropped from 66% to 54.4%, and bears rose from 12.6% to 15.5%.  That means the spread between bulls and bears dropped by 14.5 percentage points, which is the biggest one-week drop since July 2011.  Drops of more than 6 percentage points usually mark washout bottoms for prices. 

That July 2011 drop in the bull-bear came as prices crashed down 19%, following the sudden cutoff of QE2.  And there was a similar... Read More

VIX Spike Takes it Above All of its Futures

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The scary selloff on Friday, Feb. 2 took price indicators down to oversold readings, and it took the VIX up to its highest reading since the November 2016 election.  In the process, it also rose up above the price of all of its futures contracts.  In an uptrend, that is a pretty rare occurrence. 

The VIX Index is determined by how much volatility premium is getting priced into SP500 options, and so it reflects the relative degree of fear being felt by options traders.

VIX futures are... Read More

Finally, An Actual Use For Bitcoin

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Bitcoin and the other cryptocurrencies have captured the hearts of millennial speculators around the world.  Their grandfathers may have traded gold during the run-up to gold’s big blowoff top in 1980, and their parents may have traded Internet stocks in the late 1990s, but the young hipsters want to play a more modern bubble for their “It’s different this time” denial. 

Bitcoin was designed as an online medium of exchange, so that customers could use it to pay vendors for goods and... Read More