Expect Volatility to Reign This Week
Once S&P 500 Index congestion is breached, resolve will follow.
-- Friedrich Nietzsche
It's always interesting to have the ability to analyze observers' clashing perspectives after touring an art gallery. Perspectives are ingrained from education, personal experience, and even emotional state. These incongruities also happen -- and quite often, I might add -- with financial analysis when the market becomes directionless. As the summer continues and we get closer to the halfway mark of July 4, the markets have yet again returned to a position of indecision.
"Again" -- that's an understatement. Since the 2009 secular channel low, the market (S&P 500 Index (SPX)) has been attempting to reach the top of the channel (~1,550). In doing so it has succumbed to two, now possibly three, major consolatory drawdowns (~17 - ~20%). This type of continued volatility is nearly unheard of, at least in this century.
When analyzing these uncommon trends, separate perspectives become abundant. What should investors listen to?
From my firm's perspective, listen to the risk. When analyzing the trend volatility over the last three years, we can ascertain that the most probable intermediate-term support is ~1,160. This analysis suggests the current risk, from April's high, is approximately 18% and an additional 13% from Friday's close. But yet we began this piece by taking about indecision, not a probable drop or bear.
To understand if this risk will be reached, we have to look at things on a more granular level. Shorter-term the SPX has put in recent lows at 1,280 and last week retested May's 1,360 break, hence the range of indecision. It is our belief that once this area of congestion is breached, resolve will follow. Nevertheless, it is a week in which volatility will reign due to continued headlines from Europe and quarter-end window dressing.
We hope this helps.
Editor's Note: Read more at Tesseract Asset Management.
The information on this website solely=
reflects the analysis of or opinion about the performance of securities an=
d financial markets by the writers whose articles appear on the site. The v=
iews expressed by the writers are not necessarily the views of Minyanville =
Media, Inc. or members of its management. Nothing contained on the website =
is intended to constitute a recommendation or advice addressed to an indivi=
dual investor or category of investors to purchase, sell or hold any securi=
ty, or to take any action with respect to the prospective movement of the s=
ecurities markets or to solicit the purchase or sale of any security. Any i=
nvestment decisions must be made by the reader either individually or in co=
nsultation with his or her investment professional. Minyanville writers and=
staff may trade or hold positions in securities that are discussed in arti=
cles appearing on the website. Writers of articles are required to disclose=
whether they have a position in any stock or fund discussed in an article,=
but are not permitted to disclose the size or direction of the position. N=
othing on this website is intended to solicit business of any kind for a wr=
iter's business or fund. Minyanville management and staff as well as co=
ntributing writers will not respond to emails or other communications reque=
sting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.= span>
Daily Recap Newsletter