VIX continues where it left off in 2013!

VIX - Daily Chart
VIX – Daily Chart

Whilst as traders and people, we all tend to make New Year resolutions. The market however seems set to continue in the same vein as in 2013, with the primary focus remaining the constant debate of tapering, and as I have said before, what I call ‘tweaking’. Nowhere was this more in evidence, than on Friday last week, with the latest Non Farm Payroll numbers coming in far worse than expected at 74,000, and falling well short of the expected 196,000 – a truly dire number. Needless to say, employment data was and remains, one of the key metrics used by the FED in their recent decision to slow their bond buying program.  The knee jerk reaction was to sell the US dollar, as talk once again turned to the extent and depth of any tapering in the short term. So little change there. Little change either in the constantly ‘improving’ headline unemployment number, which continues to stretch the bounds of credibility further.

Also little changed is the VIX, which closed last week testing the key level of 12 once again, a price point tested on several occasions in 2013. On each occasion the index bounced of this level, creating a strong level of price support as a result, and as shown with the yellow dotted line on the daily chart. The catalyst for Friday’s sharp move lower was the NFP data, ironic really considering the signal this is sending in terms of economic growth, but as the equity bears are learning to their cost, the bullish trends in equities, are not founded on simple economics. Indeed, from a technical perspective, if this region is breached then we can expect to see further sustained gains for equities in the short term, particularly if we move into single figures on the index.

This price region now defines the VIX for 2014, and with many principal indices now pausing or pulling back, the equity bears are once again out in force and calling the top of the market. A glance at the VIX would suggest otherwise, as indeed would an analysis of the associated volume in all the cash and futures indices. None of the major markets are showing any sign just yet of a selling climax on high volume, and we can therefore assume that the market markers are happy to take these markets much higher. As always, volume will reveal the major turning points, which the VIX will then confirm in due course.

By Anna Coulling

About Anna 1064 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

2 Comments on VIX continues where it left off in 2013!

  1. Anna
    I have 4 spread betting accounts, 3 of these are trading companies which I do pretty good at.

    Now I have an account with Axitrader which has £5000 in for forex trading its been in there for 6 weeks with out a trade, even reading all your books and watching so many tutorials I still have not got confidence in trading forex. I have even taken a few paying courses.
    Now I had an invitation to trade with Alpesh Patel at a cost of course, I would rather trade with you, a guy called called Polus is after me and Vince Stanzione sends me letters and emails left right and centre.

    What do I do ?

    Terry Shead

    • Hi Terry – many thanks for your question, and apologies for the delay in replying, and first of all thank you so much for buying my books and I hope you found them useful. As I’m sure you already know, the forex market is the most complex of all the principle markets for one simple reason. It is the only market where we are trying to trade instruments in pairs, but which are then broken down further into a myriad of relationships. The eight major currencies become twenty eight currency pairs, all with their own drivers and forces, and the approach we have to take as forex traders, is to first isolate the currency and then rebuild it in all these pairs. You can think of this as first disassembling, and then reassembling something mechanical to see how it all works. This in simple terms is how we need to approach the forex market. It is what I try to explain in my books and also in the free training webinars which run weekly. I cannot really comment on the people mentioned, as I have no direct experience. However, given that you are already successful in other markets, it may simply be a case of transferring your trading approach and applying this to the forex markets. The trading disciplines will be the same, but the markets and the way they behave are very different, and this is the key. It is to understand the unique aspects of forex, rather than your trading strategies which is probably the most important thing for you to establish. I hope this helps – all best wishes and thanks again – Anna

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