• Is a 4% Down Day a Black Swan?
    On February 5, the SP500 experienced a drop of 4% in a day. We ask ourselves the question:  is a one-day 4% drop a common occurrence? The table below shows the number of 4% (or more) down days since 1970.  4% down4% down and bullishFrom 1970405 On average, a 4% down day occurred each 1.2 years, which is probably not a rare occurrence.We next counted the number of days when the SP500 dropped 4% or more during a bull market. We defined the bull market as price > 200-Day simple moving average.  Since 1970 there have been 5 occurrences, i.e. on average once every 10 years. We don’t know whether this qualifies as a black swan event, but a drop of more than 4% during a bull market is indeed very rare.The table below shows the dates of such  occurrences. It’s interesting to note that before the February 5 event, the last two 4% drops when price> 200-day SMA occurred around the dot-com period.Date%changeSeptember 11, 1986-4.8October 13, 1989-6.1October 27, 1997-6.9April 14, 2000-5.8February 5, 2018-4.1 See More Here: Is a 4% Down Day a Black Swan?
  • Correlation Between SPX and VIX
    Last week, many traders noticed that there was a divergence between SPX and VIX. It’s true if we look at the price series. Graph below shows the 20-day rolling correlation between SPX and VIX prices for the last year. We can see that the correlation has been positive lately.[caption id="attachment_327" align="aligncenter" width="564"] 20-day rolling correlation SPX-VIX prices, ending Jan 26 2018[/caption]However, if we look at the correlation between SPX daily returns and VIX changes, it’s more or less in line with the long term average of -0.79. So the divergence was not significant.[caption id="attachment_328" align="aligncenter" width="564"] 20-day rolling correlation SPX return -VIX changes ending Jan 26 2018[/caption]The implied volatility (VIX) actually tracked the realized volatility (not shown) quite well. The latter happened to increase when the market has moved to the upside since the beginning of the year.Post Source Here: Correlation Between SPX and VIX
  • Correlation Breakdown
    The US equity market just reached new highs, and it broke many records.  For example, Bloomberg reported that the US market had not been overbought like this in 21 years.The S&P 500 Index’s superlative start to 2018 is making a contrarian technical indicator look silly. The benchmark gauge is poised to end trading Thursday with a 16th straight day in overbought territory, as judged by the Relative Strength Index. That would be the longest such run in more than two decades. A close above 70 on Thursday passes the 15-session string seen in October. From Nov. 6 through Dec. 2, 1996, the gauge’s overbought streak reached 18 sessions. Read moreThe rare behavior of the equity index not only manifested itself in the overbought level, but also in the breakdown of correlation. The chart below shows the 20-day rolling correlation (upper panel) between the SPX and the volatility index, VIX. Usually, the correlation is negative, in the order of -0.79. However, it has been in the positive territory for more than a week now.[caption id="attachment_449" align="aligncenter" width="628"] SPX and VIX correlation as at Jan 26 2018. Source:[/caption]We notice that there has been a breakdown in the Nikkei stock market and USDJPY correlation as well. The chart below shows the USDJPY (upper panel) and the Nikkei 225 equity index (lower panel). The relationship was usually positive. But since November of last year, it broke down: a stronger Japanese Yen did not lead to a weaker equity market and vice versa. [caption id="attachment_450" align="aligncenter" width="628"] Nikkei 225 and USDJPY as at Jan 26 2018. Source:[/caption]For the moment, we are not going to delve deeper into the reasons behind these correlation breakdowns. We note, however, that if correlations don’t revert back to normal within a reasonable time frame, then there might be a shift in the market fundamentals.Article Source Here: Correlation Breakdown
  • Trump’s Trade Wars Send Dow Jones Industrial Average Reeling
    From Tyler Durden: It would appear — by the over 700 point drop in the Dow Jones Industrial Average on Thursday — that equity markets, and their Polyanna-ish commentators, can no longer ignore the collapse in investment-grade credit markets. Investment… Read more ›
  • Profit From Rising Interest Rates With This ETF (RISE)
    From Zacks: Investors seeking momentum may have Sit Rising Rate ETF (RISE – Free Report) on radar now. The fund recently hit a new 52-week high. Shares of RISE are up approximately 9.3% from a 52-week low of $22.59/share. But are more… Read more ›
  • More Fed Rate Hikes Are On The Way (AGGY)
    From WisdomTree: As expected, the Federal Reserve (Fed) delivered its first rate increase of the year, raising the Fed Fundstarget a quarter point to its new range of 1.50% to 1.75%. Unlike last year’s March rate hike, this latest tightening move by the Fed was widely… Read more ›
  • Which Direction Is Oil Demand Headed? (USO)
    From Irina Slav: The world’s oil supermajors and largest oil trading companies are not in agreement on the future trends in oil demand, a recent event has revealed. This, although normal, should serve as a signal to everyone watching the… Read more ›
  • What The Fed Is Getting Wrong (TLT)
    From Bryce Coward, CFA: This week, the Fed hiked the Fed Funds rate by .25% and also updated their policy statement and the so called dot plot, which is a compilation of the FOMC members projections’ for GDP growth, unemployment and… Read more ›
  • Technology Bulls Don’t Want To See Selling Start Here (QQQ)
    Technical analyst Chris Kimble looks closely at an important technology ETF’s performance versus the S&P 500 and finds reason to be cautious here. Tech stocks have been on a roll for the past 15-years (long-term bull trend) and nothing of late has… Read more ›
  • What The Fed’s New Leadership Means For Bonds (JNK)
    From Invesco: The Federal Reserve (Fed) raised interest rates by a quarter of a percentage point as expected on Wednesday and signaled two more rate hikes for 2018. It also released its Summary of Economic Projections (SEP) for the next… Read more ›
  • Trade war risk dominates investors radar screens
    Sentiment for global equities is febrile given concerns over economic growth
  • US stocks suffer worst week in more than two years
    All major benchmarks post biggest declines since week of January 8 on political upheaval
  • Week ahead: US personal consumption, UK consumer confidence
  • Wall Street skids to worst week since January 2016
    Dow Jones closes in correction territory as investor fears over trade war grow
  • Oil clocks best week in nearly 8 months on ‘Bolton premium’
  • Metro Bank chief cashes in £2.5m
    Challenger bank’s share price near an all-time high
  • The London Report: Indivior sinks on US court setback