Bumpy Ride

Review Notes

Concerns about rising interest rates continued to dominate the narrative last week after Federal Reserve Chairman Powell's comments that they had no plans to limit rates on the 10-Year Treasury Note. Markets were apparently expecting something more specific. By the end of the week, the S&P 500 Index managed to recoup earlier loses and close the week slightly higher. Uncertainty and confusion resulted in a bumpy ride for equities as the S&P 500 Index moved up or down by more than 1% every day except Tuesday. The Market Review includes details along with an updated U.S. Dollar Index (DXY) chart and a hedge idea using ProShares UltraPro Short QQQ.

S&P 500 Index (SPX) 3841.94 settled 30.79 points or +.81% higher last week after closing below the important 50-day Moving Average on Thursday then bounding back Friday to close back above it. The support zone between 3750 and 3700 contained the decline, at least so far. With anxiety about higher interest rates apparently more important than earning reports or vaccine progress, volatility could continue since Powell will comment again after the next Fed policy meeting on March 17.

Invesco QQQ Trust (QQQ308.66 declined 5.46 points or -1.74% last week after recovering 4.58 point or +1.51% on Friday. Now well below the 50-day Moving Average at 320.36 it looks broken and headed lower, but could find some support around previous October and November highs near 295. Since more interest rates increases are the top concern it claims the "decider" title and could rebound quickly should interest rates decline. Consider the hedge idea in the Strategy section below.

CBOE Volatility Index® (VIX) 24.66 slid 3.29 points or -11.77% last week. Our similar IVolatility Implied Volatility Index Mean, IVXM using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option, declined 2.86 points or -13.00% ending the week at 19.14%. The six-month volatility chart below, clearly show the Historical also called  Realized Volatility ( blue line) increasing after the January 29 SPX decline, especially in the last two weeks.

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Disclaimer: IVolatility.com is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter ...

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