Monday, January 11, 2010

Hovering market

The equity market in 2010 is trading cautiously. The volumes are far from robust, the price movements are to the upside modestly and in a lackluster way, with most days trades retracing the day before until a slight uptick. The ETF VXX, invested in equity volatility futures, is down 12% year to date. Not a long year, to date.

While I have little idea what these numbers mean I will share them in the spirit of shared intuition. The VIX, the Chicago option exchange volatility index, is today at 16, at least the numbers when low mean low volatility. A long term average for the VIX is above 19. In March 2009 the VIX was 45 and through the summer of '09 it remained in the low 30's. So today we have one highly cautious and completely undecided equity market, and consequently a market that is vulnerable in either direction. When investors perceive neither significant downside risk nor upside potential the VIX is low.

Same dilemma as always, take gains and store up reserves or invest and look for returns. Got to say that after all we've recently been through today's somnambulate results are eerie.


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