Sunday, January 4, 2015

Volatility Skew Continues to Frustrate....1.04.15

While the markets try to stabilize and find at least a short term trend volatility continues to be a wild card, defying both fundamental and technical indicators.  Here's a look at the beta spectrum using FreeStockCharts (FSC), including several outlier volatility issues that we normally don't examine but their inclusion helps to formulate something of a group consensus.
For those unfamiliar with FSC the most bullish column is Xu2 avg, which means price is crossing up thru the 2 day moving average. Abv2 avg means price is above 2 moving average, etc.   Xd2 avg means crossing down thru the 2 day movng average.
Now what's weird here is that the 2 most bullish short term signals are SH  and XIV, while the most bearish longer term (7 day) issues are SPY, SSO and XIV...for which we would expect a positive correlation.
What's the bottom line?.  Well, for risk adverse old timers like myself it means scaling back any new positions in M3 until the signals get in sync, as mentioned in the Friday M3 post.  This little study is just a confirmation that, for whatever reasons, volatility trends are not clear at the present time.
BTW, Friday's closing action was bullish for Monday, per the SPY VIXEN below..