 |
| (Click on the image to enlarge) |
After recovering from the March 2020 lows, the major indices (Dow, Nasdaq, and S&P) have been on a tear, reclaiming the earlier highs.
On its way to retesting the old highs, the market did dip several times, offering better buying opportunities, especially in late May and mid-September. For example, after reaching 27,000 in late May, Dow quickly fell back to 25,000 and provided a similar opportunity again in late September.
Though the growth has not been a perfectly linear, the investors nonetheless fared very well who stayed on or bought the dips.
 |
| (Click on the image to enlarge) |
The High-to-Low ratio is one of the quickest ways to understand market volatility. Obviously, the bigger the spread, the higher the volatility. In a stable market, this ratio will be range-bound between 101 and 103. When it spikes above 105, the market enters a phase of turbulence.
The above graph confirms that the market experienced a very high level of volatility in late May and early June; for example, from a low of 102.74 on 5/18, it dramatically climbed to 109.98 on 6/8, steadily retracing back to 103.03 on 7/56.
Many quantitative funds and traders take advantage of this volatility via liquid derivatives like options on Indices, VIX, etc.
Stay safe!
-Sid Som
homequant@gmail.com
No comments:
Post a Comment