There’s that old saying about saving the best for last, but the market flipped that on its head and saved the worst for last. Well, almost. It’s not literally the last week of the year, of course, but the market turned in its worst week of 2014. I know you might have questions going into the weekend, so I wanted to check in briefly to talk about what happened.
End to end, the S&P 500 shed 3.5% this week, with a chunk of that coming this afternoon in the late-day swoon. The reasons were basically the same ones we talked about in Wednesday’s Special Market Update: falling oil prices, concerns over the global economy and the prospect of higher interest rates.
As we’ve also talked about in recent weeks, the market has started looking tired, and it is very possible that we could see more volatility after the holidays if earnings season opens on the wrong foot. Whether the trigger was oil, pressure on the junk bond market or simple profit taking, we are clearly in the midst of a technical pullback.
One ETF that correlates to volatility (ProShares Ultra VIX Short-Term Futures: UVXY) spiked 65% this week, taking it from the edge of oversold to practically overbought, mirroring the technical conditions we saw when the stock market pulled back in August and October. That move could be about complete on a technical basis, so the proverbial “Santa Claus rally” is not yet out of the question.
This was a wild week for sure, and heightened volatility can be good for us as options traders, but things can change quickly, too, so I continue to balance both while being selective in finding high-confidence opportunities. I’ll be back in touch in Monday’s Weekly Update with a fresh look at the market, our current trades and where I see the opportunities for the coming week.
Special Market Update
There’s that old saying about saving the best for last, but the market flipped that on its head and saved the worst for last. Well, almost. It’s not literally the last week of the year, of course, but the market turned in its worst week of 2014. I know you might have questions going into the weekend, so I wanted to check in briefly to talk about what happened.
End to end, the S&P 500 shed 3.5% this week, with a chunk of that coming this afternoon in the late-day swoon. The reasons were basically the same ones we talked about in Wednesday’s Special Market Update: falling oil prices, concerns over the global economy and the prospect of higher interest rates.
As we’ve also talked about in recent weeks, the market has started looking tired, and it is very possible that we could see more volatility after the holidays if earnings season opens on the wrong foot. Whether the trigger was oil, pressure on the junk bond market or simple profit taking, we are clearly in the midst of a technical pullback.
One ETF that correlates to volatility (ProShares Ultra VIX Short-Term Futures: UVXY) spiked 65% this week, taking it from the edge of oversold to practically overbought, mirroring the technical conditions we saw when the stock market pulled back in August and October. That move could be about complete on a technical basis, so the proverbial “Santa Claus rally” is not yet out of the question.
This was a wild week for sure, and heightened volatility can be good for us as options traders, but things can change quickly, too, so I continue to balance both while being selective in finding high-confidence opportunities. I’ll be back in touch in Monday’s Weekly Update with a fresh look at the market, our current trades and where I see the opportunities for the coming week.