Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

4 Reasons Why A Volatility Event Is On The Horizon

Jason Goepfert
2019-11-13
null

This is an abridged version of our recent reports and notes. For immediate access with no obligation, sign up for a 30-day free trial now.


Volatility event

Several indicators influenced by the options market are throwing off concerning readings, showing that traders have become complacent about the current trend.

We’re currently seeing weeks of low put/call readings, with low premiums being paid for put protection, very low expectations for an imminent volatility event, and heavy betting against a rise in volatility by speculators.

If we combine the four factors above by looking at where each of them is compared to their range over the past year, then they’re all in the bottom 3% of their ranges. Since 2007, no other time has seen all four of them so compressed at the same time. There have been a handful of days that saw a low average reading, though, even if they weren’t all extreme at the same time.

While that hasn’t led to a consistent drop in stocks, it has almost always preceded a big jump in the VIX within the next two months. Over the next two months, the VIX rose every time but once – and that was the time it spiked more than 50% immediately after this signal in 2016, then settled back in the months afterward.


Yardeni's Fundamental Stock Market Indicator

There is a yawning divergence between stocks and fundamentals. And it's getting worse.

The divergence is between the S&P 500 and Yardeni's Fundamental Stock Market Indicator. This indicator looks at Consumer Comfort, commodities, and initial claims.

This indicator tends to decline during recessions. However, it wasn't quite a leading indicator: declines tended to occur along with stock market declines.

With that being said, are these divergences bearish? The following table looks at cases in which the S&P went up over the past 7 months, while Yardeni's Fundamental Indicator fell more than -5%.

Overall, this is not consistently bearish for the S&P. The Fundamental Indicator tends to fall along with the S&P 500. Its decline does not usually precede declines in the S&P 500.

DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.