Lexington Avenue Shows Us What's Happening in the Markets
It may just be me, but it's "felt" awfully quiet lately. I put "felt" in quotation marks because I haven't really been able to quantify this in any meaningful way - until now.
This view looks down on Lexington Avenue in Manhattan. At this time of day, traffic's usually pretty intense. But look at what's going on here:
Pretty quiet, isn't it? Look at that gap. You'd expect the street to be pretty full mid-day, when this was taken. Okay, if you look at the top of the gap you see three yellow cabs lined up, which likely tells us they're stopped at a red light. But typically you'd see things fill up from the traffic turning onto Lex from the side streets (43rd through 47th streets). Not here; not now.
But does this really tell us anything interesting. Not really. On the other hand, sometimes gaps grab your attention and do say something. For example, take a look at this one-year chart of the VIX (Volatility Index) Can you see the gap on the right hand side?
That gap occurred on Monday, April 24th. That was the day the stock market reacted to the French elections, something we commented on last time. Striking isn't it? Right before that, it seemed like a trend of higher volatility was building. Then wham!; the VIX collapses. Here's a guess at what's it might be telling us: Thank God Macron won the preliminary round; he'll be favored to win the upcoming final round and become France's next President; he won't take France out of the EU. Business as usual triumphs.
And so whatever concerns the market expressed prior now sink into an almost somnambulant state of quiet relief. Everything stays the same. Stocks can start climbing again. All's right with the world. (See last week's comments on the French election HERE.)
Another thing about the VIX gap we might note: The VIX had definitively climbed up above both its 50-day and 200-day moving average over the course of several months. It then fell below both in the course of a day (the gap). That's a pretty powerful reversal, but I don't have any particularly enlightening comment about what that might mean going forward. For now we continue to keep our eye on things, as we've noted in our last two posts. Nothing new to add to that.
Meanwhile, did I tell you it's been feeling awfully quiet lately?
This view looks down on Lexington Avenue in Manhattan. At this time of day, traffic's usually pretty intense. But look at what's going on here:
Pretty quiet, isn't it? Look at that gap. You'd expect the street to be pretty full mid-day, when this was taken. Okay, if you look at the top of the gap you see three yellow cabs lined up, which likely tells us they're stopped at a red light. But typically you'd see things fill up from the traffic turning onto Lex from the side streets (43rd through 47th streets). Not here; not now.
But does this really tell us anything interesting. Not really. On the other hand, sometimes gaps grab your attention and do say something. For example, take a look at this one-year chart of the VIX (Volatility Index) Can you see the gap on the right hand side?
That gap occurred on Monday, April 24th. That was the day the stock market reacted to the French elections, something we commented on last time. Striking isn't it? Right before that, it seemed like a trend of higher volatility was building. Then wham!; the VIX collapses. Here's a guess at what's it might be telling us: Thank God Macron won the preliminary round; he'll be favored to win the upcoming final round and become France's next President; he won't take France out of the EU. Business as usual triumphs.
And so whatever concerns the market expressed prior now sink into an almost somnambulant state of quiet relief. Everything stays the same. Stocks can start climbing again. All's right with the world. (See last week's comments on the French election HERE.)
Another thing about the VIX gap we might note: The VIX had definitively climbed up above both its 50-day and 200-day moving average over the course of several months. It then fell below both in the course of a day (the gap). That's a pretty powerful reversal, but I don't have any particularly enlightening comment about what that might mean going forward. For now we continue to keep our eye on things, as we've noted in our last two posts. Nothing new to add to that.
Meanwhile, did I tell you it's been feeling awfully quiet lately?
Comments