Is the market on it’s way back up?
March 12th, 2008 by Grant in: Economics, InvestingBetween yesterday and todays market action, I’m becoming more and more encouraged that we’re getting closer to the bottom of the market fallout. I’m not sure why I feel that way, because another part of me feels that another shoe may drop, and we’ll be in for another decline.
I heard a comment recently on the radio that there has never been a recession in an election year, mostly due to the fact that those running for re-election become more focused on the needs of the people they represent (i.e. the economy) as those are the people that elect them. Not sure how true that is, but I think that’s a rather general statistic and, after all, all records are broken at some point in time.
By in large, our credit crises has yet to filter in to commercial real estate, and I think it will to some extent. What effect that trend has on the overall stock market is yet to be seen.
There is a lot of money being reinvested back into the stock market today, and I’m curious to see if that trend continues over the next couple days.
My good buddy Winston told me that we’ll know we’ve found the bottom of the stock market decline when the volatility (VIX) spikes to around 30 or so. I’d like to know the rational behind that statement, but in the last five days the volatility has been up quite a bit.
Tags: markets | recession | volatility
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March 12th, 2008 at 11:54 am
You think?
While I’m not complaining about the last two days worth of gains, I think it’s entirely due to the Feds’ shortsighted actions. The exact same type of thing happened back in January, no? Bunch of down days, one big up day, followed by another round of down days…
Sometimes I wish they let things be and let the bottom fall out instead of throwing out all of these little cushions. Then we’d hit bottom and start the progression back up again…
March 12th, 2008 at 9:21 pm
Haha! Thanks for the reference Grant. The VIX is basically an index that smooths all of the out-of-the money puts/calls for the first couple of months on the S&P index and comes up with an ‘implied’ volatility for the index. Here’s my elementary knowledge of options: if more options (puts or calls) are being bought than sold, than volatility goes up, vice versa if options are being sold. If the stock market is tanking than people are willing to pay up for insurance on their positions. Thus the ‘fear’ gauge. The Vix is always relative in varying market conditions, but in my opinion we won’t see a bottom until the Vix spikes above 30% or more. The volume yesterday was better than normal, but not what I expected for the biggest up-day since early 2000’s. And today was anything but affirming. I think we’ll be in a bear market for a while, and everyone thinking otherwise is what will keep this bear market intact….
March 14th, 2008 at 7:18 am
[…] a post a couple days ago, I brought up the notion that the Chicago Board Options Exchange volatility index (VIX: chart) […]