Headlines continue forcing investors to reshuffle portfolio risks. Yesterday we outlined why VIX and Fear blur the rational view among investors. We asked ourselves rhetorically:
Understanding volatility, the VIX and fear is a great input for successful trading. Listening to media pundits bashing on about VIX this and that, has no value, and risks blurring your view on the markets. It reminds us of the Fear logic we concluded yesterday: Why not a fearful bounce, just to frustrate the crowds again?
Below are a few chart updates post our recent logic that markets remain stuck in a volatile range.
S&P 500 tried the 2600 support (intraday low 2585) and has since then bounced rather violently. There is no short-term trend for S&P 500 as the range prevails. First resistance is at 2700.
Believe it or not, but NASDAQ futures are up almost 4% from intra day lows two days ago. First real resistance is at the big 7k level, which is also where the 50-day average runs.
Even “tired” European indices have bounced higher. As we noted yesterday;
Our logic of the crowd being whipsawed by among other things, constant headline risks, continues. Just when everybody sees a break down, the markets reverse and voila, the bounce takes most by surprise.
The bounce occurred right on the lower part of the channel that has been in place since August. Eurostoxx 50 futures have a first real resistance at the 3100 level, which is basically where we trade now. If a break above that level occurs, next stop is at the 3200 level.
DAX futures also made a perfect reversal on the lower part of the channel. First bigger resistance is at the 11k level. It is almost impossible to navigate these erratic and volatile moves where indices move 5-10% in a few days, violently reverses and creates a vacuum in opposite direction. For the hedge funds still running big “gross” exposure, p/l is most probably hurting even more, causing further confusion among investors as the range continues.
Adequate risk management is the only way to handle these markets. More on the topic here.
Bullish or bearish, be sure to watch the credit space carefully. It continues being one of our global top risk indicators at the moment.
Source; charts by Bloomberg