Stocks-Rider

Lack of Fear (you read it here first)

Rating: 3.00 not yet rated(1 votes)    Vote:

You are logged in as | Logout

About two weeks ago, I surmised how lack of fear is indicating the market still has ways to go down using Google Trends indicator. I wanted to confirm what I was seeing in VIX with a more informal indicator. Hence the use of Google trends tool. While we saw that prediction unfold, many writers in financial publications and blogosphere have also started talking about VIX and its inherent complacency off late.

Moving on, the markets remain in extreme oversold condition, and yet VIX remains stubbornly complacent. Yes at the time of this writing it has gone up to 25 but where are the "35" levels? Even the google trends indicator discussed last week has remained flat to down. But then lets not forget the seasonality. With the summer going on and lot of people taking off on vacations, the following of the markets and participation in them tend to thin down a bit. So a skeptic of VIX indicator might argue if there are not enough people, who is going to panic? On the other hand, a record outflow of money from Funds have been reported last week, which may act as a good proxy indicator for waning market sentiment.

I remain on sidelines. Anticipating the recent sell off, I had scooped up a few S&P puts in my personal portfolio couple of weeks ago, that kept me from falling off the cliff in the recent bad days. Buying these puts as a hedge protection is a good idea should the markets try to make another go at the trajectory down. These usually can be slightly pricier in this kind of a market as opposed to buying slightly out-of-money VIX options one or two months away.

If you are not an options trader and more of a stocks investor/trader, then there are several ultra short ETFs to pick from as a good hedge.

Good luck
Krish Rathi