Both the stock and bond markets are becoming increasingly volatile. Going back 30 years, high volatility is common after a sustained run and subsequent to the appearance of technical patterns that indicate a reversal. This time is no different.
On May 30, I wrote about how an island reversal was highlighting the risk in the market. The island reversal followed an “outside day” traced by the S&P 500 ETF Trust SPY.
The chart of SPDR Dow Jones Industrial Average ETF Trust DIA shows how we have recently had over 450 DJIA points swings. Tuesday was especially volatile. As shown on the chart, the market gapped down over 100 DJIA points, then filled the gap and subsequently fell back again.
Please click here to see the chart of the stock market
A similar pattern is seen on other broad index ETFs such as PowerShares QQQ Trust Series 1 QQQ and iShares Russell 2000 Index Fund IWM.
The bond market has been equally volatile. On Tuesday, the yield on 10-year Treasurys rose to 2.27% and then later in the day fell strongly to 2.17%. iShares Trust Barclays 20+ Year Treasury Bond Fund ETF TLT, ProShares UltraShort Lehman 20+ Year Treasury TBT and the ProShares Short 20+ Year Treasury TBF have been highly volatile. The chart of TBT shows the big swings. The chart also shows gap up Tuesday and the false breakout. Take a look at the volume. There are more red than green on volume bars.
Please click here to see the chart of the bond market
In this period of high volatility, the SPDR Gold Shares GLD and silver ETF iShares Silver Trust SLV have not offered a less volatile haven to investors.
The tapering plan
I edit four investment newsletters. Each one has its own overarching big-picture strategy that is periodically changed based on market conditions. Until June 4, 2013, the ZYX Buy Change Alert investments were governed by the Sugar-High Plan. The sugar high referred to the effect of quantitative easing on the stock market. On June 4, the Sugar-High Plan was replaced by the Tapering Plan…Read more at MarketWatch
