Info!! What Is Dissimilar Most This Market?

An observation I've heard from quite a few traders virtually the stock marketplace seat is, "Something is different virtually this tape."  Because these are traders amongst expert instincts too considerable marketplace seat experience, I accept their observations seriously.  That led me to delve into some of the unique aspects of the acquaint market.

The outset difference was referenced inwards a recent spider web log post:  We receive got seen unusually rigid levels of buying off the recent marketplace seat lows.  Specifically, nosotros had 7 consecutive trading sessions inwards which my mensurate of Buying Pressure was a total criterion departure or to a greater extent than higher upwards the daily average going dorsum to 2012.  Interestingly, the terminal ii trading sessions receive got shown reduced buying interest; that's something I'm tracking closely.

The 2nd difference is volatility, equally documented inwards the overstep nautical chart above.  When nosotros expression at 10-day realized volatility (the ten-day average of daily average truthful make inwards SPY), nosotros tin run into that this marketplace seat is wholly different what we've seen during 2014.  This has existent implications for the sizing of positions too risk-taking, equally stocks are probable to deed to a greater extent than than we're accustomed to seeing.  If nosotros expression exclusively at implied volatility, such equally VIX (the volatility implied inwards the options market), nosotros are currently at levels that nosotros saw during early on 2014, or too therefore the Feb lows.  Realized volatility, however, is much higher.  In other words, we're seeing to a greater extent than marketplace seat displace than fifty-fifty the VIX would Pb us to expect.

The 3rd difference is reflected inwards the bottom chart, which depicts something I telephone band the "Power Measure".  Basically, the Power Measure is a running correlation betwixt volatility too toll change.  We're looking to run into if big volatility moves are tending to happen to the upside or downside.  It is non odd for the Power Measure to bottom ahead of intermediate-term marketplace seat lows, reflecting the trajectory of downside momentum, too it is non at all odd for it to peak ahead of toll during intermediate-term bull cycles.  I purpose it less equally a timing tool than equally a full general approximate to nation me if markets are moving to a greater extent than impulsively to the upside (Power > 0) or downside (Power < 0).  I hold back us to crest inwards coming days, only the shorter-term version of the indicator is already peaking at a lower toll high relative to September.  This makes me sensitive to the possibility that, despite the buying pressure, nosotros could seat inwards a lower high too right further.  The drib nosotros saw overnight amongst the NYC Ebola scare reminds us that volatility tin soundless live on both ways inwards this market.

The big takeaway for me is that in that location are limits to how much you lot tin assume that acquaint markets volition mirror by ones.  When nosotros run into odd toll displace too wholly different volatility regimes, nosotros are wise to non extrapolate from recent--but dissimilar--markets.

Further Reading:  Putting Direction too Volatility on Your Side Intraday
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