“All generalizations are false, including this one.” — Mark Twain
For those investors who may have been feeling a tad complacent due to the recent record highs of several of the major indices, last week probably served as a reminder that high volatility is always just a shout away from knocking the market down a notch or three.
Last week’s mayhem out of Boston served as just one of the factors that brought Wall Street’s recent bullish momentum up short, others being Apple’s continuing down-spiral, mixed Q1 earnings reports from a number of major corporations, the continuing dive of gold, and the reemerging concern about the health of the economy of both China and the Eurozone.
The Dow Jones Industrial Average (DJIA) experienced its sharpest weekly drop in over ten months, as it fell 2.1% over the course of the week. The benchmark S&P 500 Index (SPX) suffered a similar fate, also losing 2.1% over the same period. The tech-laden Nasdaq Composite Index (COMP) suffered a more extreme setback, falling by a hefty 2.7% for the week.
Volatility was evident in full force last week as well, as measured by the CBOE’s Volatility Index (VIX). The index, commonly referenced as “the fear gauge,” has been hovering around six-year lows for much of the year, as investor sentiment has been predominantly immersed in a risk-on mentality.
But fear in the market can come on fast and strong, as indicated by last Monday’s 42% jump in the VIX.
The relationship of the VIX to the equity market is one that is inverse in nature, so as the market goes down, the VIX generally goes up, and vice versa. But what is one man’s fear becomes another man’s greed, so the sharp drop in the market earlier in the week evidently came to be viewed by many others as yet another chance to “buy the dip.” The bottom line, at least in terms of the VIX, was that the index gave back almost 15% of its jump by week’s end.
So is this a good time to pack your portfolio up for an early summer vacation and follow that familiar Wall Street adage to “sell in May and go away”?
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Press Release Service provided by PRConnect.
Stock quotes supplied by Telekurs USA
Postage Rates Bots go here