Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Who Says Markets Are Risk Free?

By Sven HenrichStock MarketsApr 14, 2021 01:52AM ET
www.investing.com/analysis/who-says-markets-are-risk-free-200572925
Who Says Markets Are Risk Free?
By Sven Henrich   |  Apr 14, 2021 01:52AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

I’m a very lonely voice in equity markets right now. Technically nothing has really surprised me yet, not the VIX crush to the February gap fill, nor the move toward the 4156 zone on ES, all of these were part of the risk spectrum since the beginning of the year. The only surprise here is the velocity of the prices, the complete lack of respect for any deviating correlations such as moves in the dollar and yields.

Everything continues to be ignored. But because things are ignored doesn’t mean they don’t matter.

Nothing matters inside of a bubble until it does. The phrase new paradigm is becoming ever more prevalent to justify prices and the tape. Truth be told, there is no new paradigm except this one: More artificial liquidity than ever and more debt spending than ever and as a result people chasing stocks into higher valuations than ever.

That’s it. There is no mystery.

As such markets have turned entirely risk free and down days have been eliminated:

SPY Daily Chart
SPY Daily Chart

And so far the warning signs from weakening internals have not mattered. But it’s a process, it always is. Hence being cognizant of structures, patterns and history is critical to manage exposure and positioning.

So the VIX 2020 gap has been filled and VIX has been compressed again.

Let’s revisit the VIX here:

VIX Daily Chart
VIX Daily Chart

What is noticeable is that there is once again a steep compression pattern forming as SPX has once again revisited its upper trend line. In context of the 1.618 technical fib risk zone this is remarkable confluence for VIX will hardly need to see more than one market down day to threaten a bullish breakout.

For bulls the ultimate goal is to fill the even lower gap below, but the persistent volatility compression in markets has left a number of open gaps to the upside and they all suggest filling to come.

In the near term we can identify 4 open gaps:

VIX Index Chart
VIX Index Chart

My assertion: All these will get filled at some point this year and perhaps sooner than most think

Furthermore there’s a 5th gap higher up going back to April and this gap is not incompatible in target in context of the larger compression pattern:

VIX Index 2-Hr Chart
VIX Index 2-Hr Chart

All this suggests that markets are not as risk free as they are currently advertising themselves to be. Time will tell.

Original Post

Who Says Markets Are Risk Free?
 

Related Articles

Jani Ziedins
There's Still Hope For The Bull Market By Jani Ziedins - May 12, 2021 1

It’s been a rough week so far for the S&P 500 as it shed more than 80 points over the first two trading days. The index closed at record highs on Friday but by Tuesday it was...

Who Says Markets Are Risk Free?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Stephen Short
Stephen Short Apr 15, 2021 9:19AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
One lonely voice of reason. These bubbles will burst. "When?" is my question.
Werni Gerode
Werni Gerode Apr 15, 2021 4:52AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Game of musical chairs up here.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email