The US Fed has held off its rate increases, then a disappointing US Jobs report and the long awaited volatility in equity markets finally makes its present felt.
Charts Courtesy of Yahoo Finance.
The market is showing signs of fatigue. However, not in the sense of price fatigue. The market seems to be showing signs of climate fatigue. Low global interest rates, unclear job growth, global conflicts, and once strong economies showing signs of slowdown. This recipe has been a broken record for the past few years. Just when traders thought things were going to change, things seem to be staying the same.
Perhaps the recent volatility can be interpreted as a sign of willingness of investors and traders willing to change their minds on where they stand. If that is the case, then be grateful for the restful slowdown this past summer. Once markets are convinced that the global economic climate is ready for a new direction, there will more than likely be a new evolution of the market. The same dynamics that worked before, such as buying after abrupt downward moves may not be as reliable.
Indeed, after a few down-draft sessions, the equity market has shown a quick reversal of appetite.
The prior quarter in the broader markets has shown the recent volatility as highlighted by high risk names outperforming some more conservative investments. All the while the VIX and long term US interest rates doing relatively well. Mixed signals at best.
This week the economic news is light. Highlights include:
Tuesday – Eurogroup meeting, US trade balance, Canadian Purchasing Managers Index, European Central Bank President Speech; Wednesday – Japanese Monetary Policy Statement, European Central Bank Meeting, UK GDP estimate, US Consumer Credit Change, Foreign investment in Japan report; Thursday – Swiss Unemployment Report, German Imports and Exports, Bank of England Monetary Policy Decision and Statement, US Weekly Jobless Claims, US FOMC Meeting minutes; Friday – IMF Meeting, Australian Lending for Homes, Canadian Employment report.
The likely ranges for some of the popular ETFs for the week are:
| ETF Ranges for Week Ending October 9, 2015 | |||
| Ticker | Ticker Name | Lower Range | Upper Range |
| SPY | S&P 500 ETF | $194.40 | $201.00 |
| QQQ | NASDAQ-100 ETF | $103.00 | $107.10 |
| IWM | Russel 2000 ETF | $110.50 | $115.40 |
| TLT | 20+ Year US Treasury ETF | $120.70 | $125.30 |
| USO | US Oil ETF | $14.30 | $15.30 |
| GLD | Gold ETF | $106.70 | $111.30 |
Even though you may think you understand markets and your trading strategies seem reliable, it only takes a sudden change of sentiment to change dynamics that you never accounted for. Adaptation is survival. Survival is winning.
Good luck and trade rationally.