Singapore: STI Index (.STI) volatility is back
In a year full of debate on whether stocks have peaked, one thing’s clear: volatility is back.
Tuesday’s trading showed that in spades, with Japan’s Nikkei 225 Stock Average sliding 3.5% at one point before paring to close 2.1% lower. China’s Shanghai Composite quickly erased its earlier 1.3% slump and soared 1% instead as trade talks with the US were said to have resumed. And the Hang Seng Index edged up 0.1% after slumping over 2%. The fluctuations came after a 2% slide in the US S&P 500 Index.
While Tuesday’s action was triggered by a sell-off in Apple Inc. suppliers, even tech-lite gauges in Australia and New Zealand slipped at least 1%. It’s all part of a broader pattern that’s seen more frequent moves of 1% to 3% in either direction. A gauge of 30-day turbulence in the Nasdaq 100 Index has tripled in five weeks, taking it to the highest since 2011.
Both sell-side and buy-side strategists are adjusting to turbulence in global stocks that may be here to say. The Cboe Volatility Index, known as the VIX, is heading for its biggest annual surge since 2007.
Stephen Innes has a mantra: Never nix the VIX. “One should never disregard it,” he says. “It is the leading fear gauge. It scares the hell out of investors when it moves.” The head of trading for Asia Pacific at Oanda Corp. in Singapore says volatility is “excellent” as long as hedges are available.
Here’s some thoughts from market players on how they’re incorporating the resurgence of volatility into their strategies:
Communication is key
With the new reality having the potential to spook individual investors, advisers have all the greater need to stay in touch with their customers.
“We are looking at new ways to communicate more with clients — like podcasts, newsletters to resonate the message as cleanly as we can,” said Chris Weston, head of research at Pepperstone Group Ltd. in Melbourne. “As volatility increases, the media reports more, which creates emotions in traders.”
Consider cash, options
Volatility is good for brokerages and flow-based businesses but is probably bad news for long-only investors and funds, said Margaret Yang, a market analyst at CMC Markets Singapore. She has a solution for them: selling out-of-the-money put options in an attempt to pick up shares at lower prices, with option premiums an additional bonus. Or, there’s sitting on the fence. “I tend to adopt a ‘wait and see’ position with some spare cash in hand until things are clearer for trades and dust settles down for the tech sector,” Yang said.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 3,134.69.
The projected lower bound is: 2,966.37.
The projected closing price is: 3,050.53.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 23 white candles and 26 black candles for a net of 3 black candles.
A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 6 falling windows in the last 50 candles–this makes the current falling window even more bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 34.2477. This is not an overbought or oversold reading. The last signal was a sell 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 45.97. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 8 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 9. This is not a topping or bottoming area. The last signal was a sell 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 7 period(s) ago.
Rex Takasugi – TD Profile
STRAITS TIMES closed down -14.550 at 3,053.600. Volume was 8% above average (neutral) and Bollinger Bands were 16% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 3,058.14 3,122.33 3,335.47
Volatility: 21 17 16
Volume: 242,084,336 232,747,792 249,356,464
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
STRAITS TIMES gapped down today (bearish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
STRAITS TIMES is currently 8.5% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .STI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .STI and have had this outlook for the last 22 periods.
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