Prepare for more volatility. Yes and when the markets are calm, prepare for low volatility. And to further expand on this ground breaking revelation, when it's raining out prepare to get wet. I know... in just a few short sentences I blew your mind. Get used to it.
2015 is off to a rocky start. If the market wasn't volatile enough to kick off 2015, earnings season could provide even more opportunity for the market to gesticulate violently... yes gesticulate. It's not just your normal run of the mill volatility, its the type that makes you want to gesticulate in a violent manner. I usually wear a sturdy set of goggles during trading hours so I don't poke my eye out.
Let me explain:
If you've been trading this market the last few weeks there is a good chance that these violent price swings have provided you with tremendous trading opportunities. But these swings also provide the chance for poor traders to that much more terribly. When things are going good in this type of market, odd's are your doing even better than you normally would be, and the same holds true for traders who are struggling.
Over the first few weeks of 2015 I've watched profits erode, losses mount, gains grow... my trading has run the gamut providing moments of joy and moments of frustration. While this is happening I can usually be found, when my finger isn't combing the nasal passage for a few dry scraps, giving the finger to the chart in question. This would be a trade that isn't going my way.
On the flip side when a trade is going my way I like to pump my fist in the air. And, like December 1st when I purchased $AAPL puts just minutes before the stock flash crashed, this fist pumping is usually joined by a loud scream of joy, and/or multiple cheerful grunts. Members of the chat room can attest to this. Lucky for them there is an icon they can press to mute me but keep other members audio available.
While I like to gesticulate wildly, and this market is affording that opportunity on a daily basis, there are days when I let my mind do the gesticulating.... if that makes any sense.
Here is what I mean. Sometimes I'll make a trade, it moves the direction I think it will, and the profits keep piling up.
- The Fonzie Thumbs Up:
"Aaaaaay" Don't mess with me, I'm making some great profits today. Nobody messes with the Fonz when he's in the zone. I just can't lose.
- The Yellen Surrender:
Are you kidding me?!?! I go long, it goes down, I go short it goes up.... I surrender! I blame this 100% on the FED. There is no other reason why my trades aren't working out, none. It's all Yellen's fault. Why the heck does she have to wear a silk scarf in the middle of the summer?
- Another one I visualize from time to time is of Jose Canseco giving the middle finger, I couldn't find an image of it because apparently he blew that finger off last year.......
What's worse, in this market you could be wrong about a stock in a big way one day, and right about it the next. Look at $FEYE two weeks ago. The stock was up 5% on Monday, down 9% on Tuesday up 5% on Wednesday and finished near the high of the week on Friday. Tuesday's down day likely shook a lot of people out of the stock. That's volatility folks!
Last summer, before the market pulled back it seemed everyone was complaining about how the market was boring, volume was low, complacency was near record levels. It was BORING.
Now in 2015, the market is moving shparly intra-day, stocks are gapping highers and lower seemingly every day of the week. Stock futures in the overnight session are making 2.5% round trip moves in hours. Those who complained last year about the low volatility are now upset about the high level of volatility. You just can't win.
VIX Chart:
Personally I'd take a market that is moving over that slow, boring action of last summer.
Prepare for More Volatility
It looks like 2015 is going to be a volatile year. Bring your umbrella.
