Volatility Just Gave us a Big “Heads Up”
Using indicators to trade is an important skill to learn.
Here’s an example. Options use their moving inputs – price, volatility, time – to change value. Accordingly, you can use these inputs to your advantage. Mark, Frank, Licia, and I show you how to do this during our live Profit Takeover time with you during the week. It’s also part of the equation in my Weekly Profit Cycles service that I live trade with subscribers on a Wednesday afternoon at 2:30 ET.
Markets do crazy things. So, as a trader, you must know how your position is going to respond.
One of those crazy things the markets have been doing a lot lately is to be volatile.
However, the 90-day realized vol hit one-year lows this week. Averaging at around 18% a day through the first quarter, it’s the lowest volatility level we’ve seen since 2021.
See for yourself in this chart…
What does it mean?
It means the market is shifting out of a major cycle.
What it means for YOU, is that you should prepare for…
The Coming Bull
I know it sounds crazy, but lower realized volatility must happen before stocks can start a steady, volatility-crushing rally.
Low points in the market tend to happen when realized volatility peaks… and visa versa.
Remember, realized volatility is a measure of how much stocks are moving. Daily big candles create those higher realized volatility numbers.
Look back at that chart. You’ll notice that the 90-day average number is the smoother line. That means 90-day average realized volatility is lower and daily candles are much smaller than they were in October.
This is how rallies start.
The difference now is that these rallies will be lower volatility affairs as the market adjusts to interest rates at current levels and the Fed interference starts to subside somewhat.
I’m feeling pretty bullish. You should feel that way too. And you can find out how to trade this new environment by joining us on Money Morning Live every morning… and by tuning in to Profit Takeover this Friday.
There’s one sector in particular that Mark if particularly bullish on and that’s energy. He’s prepared a watchlist of stocks for you in this space and will be sharing those details with you tomorrow and Friday. Watch out the those.
April 05 2023
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