In today’s briefing:
- A Coming Crash: The Law of Conservation of Financial Volatility?
- Seven Reasons Why Traders Should Grit Their Teeth and Buy
- The Anatomy of a Failed Breadth Thrust
A Coming Crash: The Law of Conservation of Financial Volatility?
- Volatility is sequential and the turbulence and illiquidity in forex and bond markets will inevitably spread to equities? A CRASH could be coming!
- VIX has already moved up, but this barely acknowledges volatility elsewhere. The VIX always sees greater volatility because it includes the effects of economic volatility as the business cycle breaks
- Upcoming World recession seems set to force the VIX above 50 index points. Stay ‘risk-off’ and choose ‘carry’ at the front-end of yield curves
Seven Reasons Why Traders Should Grit Their Teeth and Buy
- Market and sentiment indicators are lining up for a strong relief rally.
- While the intermediate-term trend is still down after a bounce, traders should be prepared for a rip-your-face-off rally that could happen at any time.
- To be sure, tail-risk is still present. The Guardian reported that Ukrainian intelligence believes the threat of Russian use of tactical nukes are “very high”.
The Anatomy of a Failed Breadth Thrust
- Many technical analysts turned excited in late August when the percentage of S&P 500 stocks above their 50 dma surged from 5% to 90%. Since then, the breadth thrust fizzled.
- We can think of two possible scenarios for U.S. equities. The first is a multiple bottom, with several re-tests of support and a final bottom next spring or summer.
- The second the world experiences a financial crisis with sufficient contagion risk that global central bankers are forced to pivot monetary and save the system.
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