Does This Mean We’re Safe?

By Jani Ziedins | End of Day Analysis

Jan 29
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

Stocks bounced back, reclaiming a big chunk of Wednesday’s losses. Volatility remains insane as today’s 35-point intraday surge nearly matches yesterday’s 40-points intraday slide.

While today’s third bounce off of 1,990 revives bull’s confidence, it is hard to feel good about a market that whips around 2% a day. Boring markets are healthy and bullish, but this market is anything but boring.

We are only three-percent from all-time highs, but this volatility shows uneasiness creeping in. The Wall Street Journal reports intraday price ranges have swelled 50% this year as compared to 2014’s more sedate trade. Yet the VIX remains under its 10-year average of 20, showing lower than typical levels of fear. And not only is the market near all-time highs, we are also trading at premium forward earnings multiples versus historic averages, 17 vs 14.6.

Source: WSJ.com

Source: WSJ.com

Record stock prices, increasing realized volatility, low implied volatility, and stretched multiples; makes you wonder if smart money is buying or selling here. Okay, I admit that was a rhetorical question because the answer is obvious.

Stay safe.

Jani

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and writer who has successfully traded stocks and options for more than a decade. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes manufacturing engineering at Fortune 500 companies, structural engineering, small business consultant, collegiate instructor, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two young children.