The elephant in the room is still the US market and where to from here is debatable for the moment. The finish was good on Friday but the volatility remains and is likely the key to how the market will play out going forward.
The volatility index (VIX) which reflects the fear level as defensive strategies are exercised is key to this and will be followed closely in the coming days and weeks. I have taken a daily snapshot of the VIX as seen below and the recent spike says it all. Usually there is the odd modest spike up around the 15 level when minor skirmishes occur but obviously it has moved into the extreme zone recently although it has started to pull back.
The key going forward will be how the market perceives the risk level and the VIX should progressively fall as the market heavies readjust their outlook and back off the defensive stance.
I have added updated SP500 (SPX) weekly chart - the index hit and bounced from the 200 day MA (40 week MA is equivalent on the weekly) and recovered on Friday to close on the trend line again.
Since the closing high 3 weeks back the SPX has closed down 8.8% whilst the high/low range for the period was 11.8%. At this point this could be considered a modest pullback and next week will be interesting, particularly the VIX.
SPX Weekly
VIX Daily
AJX Price at posting:
30.0¢ Sentiment: Buy Disclosure: Held
