Volatility is Way Up
Stocks are Slightly Down
Fed's Brainard Speech Today
Please note: All data, figures & graphs below are valid as of September 12th. CFD trading carries risk to capital and losses may exceed deposits.
Hooray for Movement!
Over the last 40 trading days, since July 15th, the S&P500 has seen its longest bore streak in history. With a low point of 2,147 and high point of 2,193 this index hasn't moved less than 50 points from peak to trough all summer long.
Last Friday the silence was broken with a massive sell off, all the way down to 2,122. And the negative pressure continues even over the weekend as this benchmark index is now testing 2,100 even...
Still, we're only talking about a 2.5% decline, which in the grand scheme of things is not very much for an index which is still trading quite close to its all time highest levels.
As you can imagine the volatility is up with the VIX index jumping to 17.5 for the first time since the post-brexit excitement (circled in red)...
Traders on Both Sides
Our marvellous DAX trader @Running-Chris managed to get short just before the storm and is holding 4 sell positions on the Ger30 since Friday...
On the other side we have traders like @JamesLewis5 who is holding a well diversified portfolio of tech-stocks. James is very confident that all this will blow over very shortly and has posted the following reassurance on his wall...
In fact, it's very possible that both of the above traders will come out profitable here. Chris is more of a short term trader and looking to take advantage of the volatility, whereas James is holding long term and looking to take profits over the next few years.
This is the Fed's Market
What caused the moves?
As usual, behind these sudden massive market moves is the institution, the US Federal Reserve. On Friday the President of the Boston Fed, Eric Rosengren, switched sides. Rosengren is usually quite dovish, with a view that money should be loose and rates should stay low.
However, in his speech on Friday Eric stated that keeping the interest rate low for too much longer could be risky to the economy.
After the speech, focus was shifted to the next Fed member's speech. Lael Brainard is set to deliver her speech later today, about noon time in the US. This will be the last major announcement from the Fed until their meeting on September 20-21st.
Lael is also a known dove. However, speculation is increasing from market analysts that she may be about to switch sides as well. If Brainard starts talking about "sooner rather than later" interest rate hikes, not only could we see a rate hike this month, it will be entirely possible that we'll get 2 hikes before the end of the year.
Either way, volatility is up now and, from a trader’s point of view, let's hope it lasts.
This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
Past performance is not an indication of future results. CFD trading carries risk to your capital, and losses can exceed your deposits.