Monday, October 10, 2011
The Stock Market: Now More Volatile Than Ever!
By Peter Gorenstein | Daily Ticker – 2 hours 47 minutes agoIf the market seems more volatile than ever that's because, based on many metrics, it is!
Today's Wall Street Journal has the stats:
- The Dow's average daily move of 1.7% since August began is twice the decade's average.
- Seven moves of more than 3% since August began.
- Moves of more than 1% on 33 of past 49 trading days.
Ed Dempsey CIO of Pension Partners, a manager of pension funds based in New York City, says he's never seen anything like this in his three decades on Wall Street. "I have not seen (volatility like this) and I started in the crash of '87," he says.
In the accompanying interview with Aaron Task, Dempsey says the wild swings are a result of advances in technology. "You have so much information that is so unfiltered, but the key is that it's so actionable," he observes. "Now anywhere in the world where you are you can take out your smartphone and you can act on the news."
The WSJ says all this volatility is detrimental to the markets. After all, the Dow is down 13% since its April high (not counting today's rally, which itself is a sign of volatility). Plus, the swings scare off individual investors, leaving only the big players on the field. The good news, according to Dempsey is that the worst is behind us, at least for now. He's predicting a major stock rally to begin very soon, if it hasn't already. (See: After Predicting the "Summer Swoon," Ed Dempsey Now Sees a "Fall Melt-Up)
Some blame the added volatility, not only in recent months but the last few years, on the growth of high frequency trading, which according to some, accounts for 50% of U.S. trading volume each day. Regulators in the U.S. and Europe are looking into ways to curb high-frequency trading and/or learn more about their activities. Dempsey thinks that's a good idea. "Like most things with the markets, people are ahead of the rules and regulations. Rules and regulations absolutely need to catch up."
NEW YORK (AP) -- Stocks futures are rising after the leaders of France and
Germany vowed to strengthen Europe's banks to help them weather the region's
debt crisis.
German Chancellor Angela Merkel and French President Nicolas Sarkozy on Sunday said a "comprehensive response" to the debt crisis would be finalized by the end of the month, including a plan to ensure banks have adequate capital.
That reassured investors, even though the leaders provided few specifics on how the plan would work.
Ahead of the opening bell, Dow Jones industrial average futures are up 125 points, or 1.1 percent, at 11,191. Standard & Poor's 500 futures are up 14, or 1.2 percent, at 1,169. Nasdaq 100 futures are up 29, or 1.3 percent, at 2,230.
The bond market is closed for the Columbus Day holiday.
German Chancellor Angela Merkel and French President Nicolas Sarkozy on Sunday said a "comprehensive response" to the debt crisis would be finalized by the end of the month, including a plan to ensure banks have adequate capital.
That reassured investors, even though the leaders provided few specifics on how the plan would work.
Ahead of the opening bell, Dow Jones industrial average futures are up 125 points, or 1.1 percent, at 11,191. Standard & Poor's 500 futures are up 14, or 1.2 percent, at 1,169. Nasdaq 100 futures are up 29, or 1.3 percent, at 2,230.
The bond market is closed for the Columbus Day holiday.
NEW YORK (CNNMoney) -- U.S. stocks were poised to open sharply higher Monday, as investors welcomed a pledge from European leaders to unveil a plan to solve the European debt crisis by the end of the month.
Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were up more than 1% ahead of the opening bell. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.
Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were up more than 1% ahead of the opening bell. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.
NEW YORK (MarketWatch) — U.S. stock market futures rose Monday
as France and Germany pledged to do everything necessary to support Europe’s
banks, while investors also looked ahead to the start of third-quarter earnings
season.
Futures on the Dow Jones Industrial Average /quotes/zigman/2976950 DJ1Z +1.14% gained 137 points to 11,203 and those on the Standard & Poor’s 500 index SP1Z +1.29% rose 15.60 points to 1,170.50.
Nasdaq 100 futures ND1Z +1.41% were up 29.50 points at 2,231.25.
Technicians turn bullish
By Barry Ritholtz - October 10th, 2011, 7:30AM
By Barry Ritholtz - October 10th, 2011, 7:30AM
I mentioned last week that I believed we were due for a rally lasting 4-7 days, and a move 5-7% higher.
The WSJ Ahead of the Tape column discusses some of the reasons many Technicians are starting to turn Bullish — whether its for a trade or something longer lasting. Last Tuesday was an “Outside reversal” day, something pointed out by several traders in the article.
I do not blithely dismiss technicals the way many value or fundamental managers do. But I do want to see statistical evidence that there is some validity there. Recall that our prior look at technical signals like the Death Cross and the Hindenberg Omen pointed out they were less reliable than a random coin toss. Some explanation as to causation helps, so we know we are not confusing mere correlation as well.
Which brings us to an Outside Reversal day. I understand the thinking behind the Japanese Candlestick charts, but I have been unable to find any data that shows the reliability of this day historically.
But to me, the real key is going to be the next few quarters of earnings. If we see a move off of the recent peak as the economy softens, it suggests stocks are priced dearly. If earning can maintain their strength, then stocks are cheap here.
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The WSJ Ahead of the Tape column discusses some of the reasons many Technicians are starting to turn Bullish — whether its for a trade or something longer lasting. Last Tuesday was an “Outside reversal” day, something pointed out by several traders in the article.
I do not blithely dismiss technicals the way many value or fundamental managers do. But I do want to see statistical evidence that there is some validity there. Recall that our prior look at technical signals like the Death Cross and the Hindenberg Omen pointed out they were less reliable than a random coin toss. Some explanation as to causation helps, so we know we are not confusing mere correlation as well.
Which brings us to an Outside Reversal day. I understand the thinking behind the Japanese Candlestick charts, but I have been unable to find any data that shows the reliability of this day historically.
The technical data points that support a rally here include:The bailouts in Europe, the German pledge to protect European banks, the Merkel and Sarkozy pledge for bank recapitalization, are just as likely a cause of today’s lift as the technicals.
• Divergences between NYSE New 52 Week Lows and Market lows — NYSE is making less New lows while the S&P isn’t, a positive divergence.
• % of NYSE Stocks above their 200-Day Moving Averages — about 15%, up from 7%. When in this range, stocks tend to eventually rally. Note they slipped from 15% over a few months to 1% in March 2009 — so its hardly a precise timing tool.
• VIX: The spike last week to 45 suggests excessive fear (Caveats abound for this indicator also, whixh hit 48 on August 8)
• 90/10 days — several downside 90/10 days in volume and breadth help washout sellers, albeit somewhat temporarily these days. At the very least, the 90/10 days imply a short term rally.
But to me, the real key is going to be the next few quarters of earnings. If we see a move off of the recent peak as the economy softens, it suggests stocks are priced dearly. If earning can maintain their strength, then stocks are cheap here.
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