Today I posted my two-hundred-and-seventy-first YouTube Video: Lots of Volatility But It’s Not Tradeable.
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Today’s topic is Lots of Volatility – But It’s Not Tradeable. The market has not been responding as expected to recent events. On Friday, May 5, a combination of a chaotic market, a banking crisis, and job numbers that were much higher than expected, resulted in a completely unexpected market reaction. On previous behavior, these higher job numbers would have led to a conclusion that the Fed would continue to raise rates. Stocks would have tumbled. But Friday this time, we got a big rally in the news in the report. The market is vacillating between belief in a recession with banks failing, and belief in a strong job market where the Fed continues to raise rates. That’s created a scenario of wild swings, driven more, I’d argue, by where prices have been recently than by any trend in the news. You can see this in the VIX. The “fear index” rise as banks struggled but the jobs report said that it was alright to bid bank stocks (and the market in general) higher on the day even if the regional banking crisis is a long way from over. I’d prefer to trade volatility when “all” it requires is getting the direction of the news correct. Bu,t the current market requires getting both the trend in the news and the market’s reaction to that trend right in order to make a profit. That’s harder than I’d like and it seems prudent to wait for more predictable (and tradeable) volatility.
Here’s the link:
