Find new investment opportunities based on Market Sentiment Indicator. Manage watchlist risk with leading indicator of volatility See what influential analysts and investors are saying about stocks in your watchlist
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Find new investment opportunities based on Market Sentiment Indicator. Manage watchlist risk with leading indicator of volatility See what influential analysts and investors are saying about stocks in your watchlist
Most Trending
Most Trending
TrendspotteamFinding new investment opportunities based on Market Sentiment and Indicators. Manage portfolio risk with leading indicator of volatility See what influential analysts and investors are saying about stocks in your watchlist
In recent weeks, there was no unexpected significant negative event that would explain why there is a change in the atmosphere in the stock markets from a state of cautious optimism, which was reflected in the rise of the stock indices since the beginning of the year, to a state of considerable pessimism that is reflected in the feelings of all the many investors.
More and more analysts, financial institutions (JP Morgan) and policy makers (the World Bank) have begun to publish negative opinions, which claim that the companies' profits in the second half of 2023 and perhaps also 2024 will decrease significantly and the economies will enter a recession. Professor Rogoff, a well-known economist, even went so far as to claim that we will experience stagnation until 2030 when interest rates will climb above 4% and remain at this level for many years to come.
In the early 1990s, the derivatives exchange in Chicago launched a new instrument - VIX options. The options are defined on the VIX index, which is structured as follows: at each point in time, the "standard deviation arising" from the 30-day option prices defined on the 500S&P is calculated. The resulting standard deviation is the one that, using the Black&Scholes formula, reaches a price identical to the market price.
The implicit assumption is that the standard deviation embodied in option prices reflects the level of uncertainty of capital market participants. When the standard deviation is low, this reflects low uncertainty and optimism among investors, while when the standard deviation jumps up, this reflects excessive uncertainty and pessimism. Take for example the VIX index during the Corona period when the market had to deal with a situation it had not known before.
Despite the new wave of pessimism in recent weeks, wonder and wonder, the VIX index, also known as the fear index, dropped to its lowest level since the pre-corona period and clearly shows a decrease in uncertainty and an increase in the level of optimism of the stock market. This level of optimism was last observed in 2019 before the impact of the Corona epidemic.
The behavior of the stock markets is a preliminary measure of the economic trend, i.e. a signal of future economic developments. Therefore, is the VIX index a preliminary index to the preliminary index which is the stock market?
In most periods VIX behaved simultaneously in the same way as the stock market. At the same time, the index gives a supportive indication of a trend change. The assumption is that the state of the stock market already embodies the expected economic developments in the next quarter or two, meaning that the stock market has already digested the expectation that the companies' profits in the coming quarters will not be alarming, but the expectation is more optimistic about next year.
If the stock market changes its mind, the VIX may support the hypothesis. For example, if the stock market stagnates downward in the coming weeks, the VIX can behave in one of two ways: maintaining the current level and continuing to decline or changing trend and jumping up. In the first case, it will be premature to conclude that the stock market will show a negative trend, while the conclusion will be the opposite in the second case.
Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.
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Disclaimer:
The Score performance whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained.
The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. The Readiness Indicators, Sentiment Indicators and total score are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. Active trading is generally not appropriate for someone of limited resources, limited invesment or trading experience, or low-risk tolerance. Your capital may be at risk.
Please note that no offer or solicitation to buy or sell securities, securities derivatives of future products of any kind, or any type of trading or invesment advise, recommendation or strategy, is made, given or endorsed by StocksRunner including any of their affiliates ("TS").
This information is provided for illustrative purposes only. You should not rely on any advice and/or information contained in this website and before making any investment decision. we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.
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Disclaimer:
The Score performance whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained.
The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. The Readiness Indicators, Sentiment Indicators and total score are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. Active trading is generally not appropriate for someone of limited resources, limited invesment or trading experience, or low-risk tolerance. Your capital may be at risk.
Please note that no offer or solicitation to buy or sell securities, securities derivatives of future products of any kind, or any type of trading or invesment advise, recommendation or strategy, is made, given or endorsed by StocksRunner including any of their affiliates ("TS").
This information is provided for illustrative purposes only. You should not rely on any advice and/or information contained in this website and before making any investment decision. we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.
