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//Declining Liquidity //

Don FishbackStock Market, VolatilityLeave a Comment

This article is behind a paywall. But the headline provides the key point: Liquidity of the E-mini S&P 500 futures contracts is shrinking – hit hard after the two volatility shocks in 2018. Liquidity provides a cushion for those times when the market goes haywire… up or down. When that cushion disappears, volatility has a tendency to be higher than normal. … Read More

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//Good News on the Data Front //

Don FishbackOptions, Stock MarketLeave a Comment

Long gone are the days when the exchanges made the bulk of their money from trading. These days, the exchanges make the bulk of their profits from data. And my guess is that many of you have no idea how expensive data is. Yes, you get data from your broker. But it’s probably price information, maybe volume, and some publicly available … Read More

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//Crowding is Back //

Don FishbackGeneral Investing, Stock Market, Uncategorized, VolatilityLeave a Comment

I recently recorded a video about market fragility and how Dispersion Trading can be an elixir to markets that experience explosive volatility out of nowhere. But what causes that explosive volatility in the first place? The answer is low liquidity. Rising rates have a lot to do with it. But another factor is “crowding”. And there are two developments that … Read More

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//Underdogs Win //

Don FishbackProbability, Stock MarketLeave a Comment

With the Super Bowl being the largest betting event in the US, this seems appropriate. You’ll love having these hated stocks in your portfolio Trading is like betting against the spread. When you bet on the favorite, they don’t need to just win, they need to cover the spread. If they don’t, then the bet on the underdog pays. Doesn’t … Read More

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//Emerging Markets Since October 30 //

Don FishbackStock MarketLeave a Comment

Emerging Markets (green line) beating both the S&P 500 (purple) and the Euro Stoxx 50 (orange). With so many people betting on risk-off environment, it’s pretty counterintuitive that the riskiest part of the global stock market had the smallest drawdown in December and is the market that is biggest gainer! It’s going to be very interesting to see how this … Read More

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//VIX Implied Volatility is Very Low //

Don FishbackStock Market, VolatilityLeave a Comment

VIX has come down from its recent peak. But the real story to me is what’s going on in the VIX options market. In the recent past, whenever VIX shot higher the implied volatility of VIX options (ticker symbol:VVIX) also shot higher. For instance, in August 2015, when China devalued its currency, VIX climbed to 40.74. The implied volatility of … Read More

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//Breadth Thrust //

Don FishbackStock MarketLeave a Comment

This is a chart going back more than 50 years showing signals generated by an indicator developed by the late, great Marty Zweig. The indicator is a measure of market breadth. You take NYSE advancing issues, then divide that by the sum of NYSE advancers and decliners. You then take the 10-day exponential moving average of that ratio. What you … Read More