Volume offers valuable information on the intentions of buyers and sellers, the potential for diversification and, at the minimum, another piece of the trading puzzle.
There is some controversy in the technical trading community on whether or not the October 2014 selloff in equities officially qualified as a correction, defined as a 10% move from the top.
The theory behind the Mass Index is that reversals occur when the price range increases. By tracking the high-low range, this indicator identifies trend reversals based on range expansions.
Implied volatility came screaming off as the stock market rallied on Tuesday. The catalyst was a warm and fuzzy feeling flowing from China after the central bank slashed interest rates in an effort to help stem the tide of selling.
The CBOE Volatility Index exploded on Monday morning as huge overnight selling in the major indexes in reaction to continued weakness in the Chinese stock market led to increased volatility.
The pressure in the equity markets has taken a breather as the Chinese indices stopped their plummet for the moment, sending some mixed signals through the commodity world. One would assume that an across-the-board correction would be in the offing, but we haven’t seen that response as of yet in the energy and agriculture markets.
On Friday, the VIX closed the bullish window dating from early-December, paving the way for new gains in the S&P Index. Elimination of support in the VIX at 12.08 leaves some accounts over-hedged for the prospect for a back up in the S&P 500. This should lead to some more aggressive equity buying today and later this week.
