In today’s market update, I want to ask you a question: Can you say Volatility? Of course you can, but wow, the markets are shouting it from the roof tops! I review the current charts on volatility, including updates on index futures, gold, and coffee.
From the charts
The daily chart of the volatility index (VIX) gives us a great picture of the current market change. In only four weeks, the VIX has surged from 12 to over 85, just short of the 2008-2009 housing bubble fiasco, where VIX shot up to 89.53. As you know, when VIX goes up, the market usually goes down. Also, as VIX increases, so does the ATR of the markets. And this has a HUGE impact on retail traders, and their ability to trade these markets.
With increasing volatility, the brokerages are also enacting FULL margin requirements on all positions, and are liquidating positions that don’t have stop orders attached. And the margin requirements for many of the futures markets have gone ballistic. For example, the Nasdaq (NQ) has an initial margin requirement of $16,500. Many retail traders only have accounts in the $5000 – $10,000 range, so this effectively keeps them from trading this market.
However, with the injection of new money into the markets from the government, via buying debt, there is a brief relaxing in the VIX, and corresponding rallies in the equity markets. Hopefully, this will be enough to create a consolidation area and enough time for the markets to pause and regroup.
Gold is going ballistic again. Overnight, gold rose over $130, getting back into striking range of $1700/oz. Watch for the recent strength of the USD to begin to weaken.
Last but not least is coffee. Last week, I highlighted coffee in the $108 range. I showed the technical reasons to start to accumulate coffee and to watch for reasons to go long. Today, coffee has hit over $125, up over $17 since last week.
The Hawkeye Perspective
If you know how to read the charts, volume and price are telling you a story. Are you listening, and can you understand what the markets are telling you? We teach you every week how to interpret volume and price together. Get started today with your very own copy of Hawkeye, by clicking the link below. Learn to trade the Hawkeye way.