From the March 2013 issue of Futures Magazine • Subscribe!

Equity bulls’ suspended sentence

Anthony Lazzara, CEO of investment firm Lido Isle Advisors, is bullish equities. He cites the combination of the European crisis drawing down, fears of the fiscal cliff dissipating and the low VIX as reasons. He expects the S&P 500 Index to reach 1550 by June. “It is going to be a stair-step up,” he says.

The VIX has spent most of 2012 in the teens and set a low of 12.30 on Jan. 23. However, Director of Lucas Wave International Jeff Greenblatt, says a depressed VIX is not a positive sign for equities. “The smart money is getting bullish when VIX is at 35 to 40, not now. Markets cannot sustain a rally with the VIX so low.” (See “Leveraging the VIX to spot trend changes,” page 24.)

While a bullish stock market tends to depress the VIX, large moves higher tend to begin with the VIX above 35 (see “Launching pad,” below). 

The same can be said of many drivers of the current bull market. Low interest rates and record high corporate profits are signs of a bull market, but markets are forward-looking; at some point rates must go up and companies cannot hoard cash indefinitely. 

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