Volatility takes a holiday
April 17th, 2009 by Bryden Elssmann
Closing Data
| current | change | % | |
|---|---|---|---|
| Dow Jones | 8125.43 | 95.81 | 1.2% |
| NASDAQ | 1670.44 | 43.64 | 2.7% |
| S P 500 | 865.3 | 13.24 | 1.6% |
| FTSE 100 | 4052.98 | 84.58 | 2.1% |
| Nikkei 225 | 8755.26 | 12.3 | 0.1% |
| SPI Futures | 3843 | 56 | 1.5% |
| All Ords | 3,726.00 | 31.7 | 0.9% |
| Oil | 49.97 | 0.71 | 1.4% |
| Gold | 879.8 | -13.7 | -1.5% |
| Silver | 12.255 | -0.545 | -4.3% |
| Aluminium | 1456.5 | -12.5 | -0.9% |
| Copper | 4766 | 16 | 0.3% |
| Lead | 1525 | 23 | 1.5% |
| Nickel | 12270 | -130 | -1.0% |
| Tin | 11600 | 0 | 0.0% |
| Zinc | 1501 | 52.5 | 3.6% |
US stocks climbed for a second day as investors overlooked troubling economic data instead focusing on JPMorgan Chase’s better-than-expected first-quarter results and Hewlett-Packards rally in the technology sector. Wall Street is trading at its highest levels in months. The Nasdaq hit a 5 month high, up 44 points, ending at the highest point since 5 November, 2008. The Dow was also positive, up 96 points or 1.2% to 8125.43 and the S&P 500 added 13 points, or 1.6% to 865.3. Both markets closed at their highest level since 9 February. After the US markets closed, Google posted quarterly earnings, topping estimates with revenue rising from a year ago.
The Australian market is set to open stronger this morning following on from overseas gains. The market has surprised everyone to the upside and people are impressed at how it is holding onto gains, yesterday the ASX 200 traded above 3800 ending the session up 31.7 points or 0.9% to 3726. The market may see a continuation of the rally in the short term before pulling back.
The five-week rally on Wall Street and the ASX has been driven heavily by market momentum and a pronounced drop in the Volatility Index (VIX). As mentioned in previous Market Fox updates, the VIX is the markets main fear gauge and has fallen almost 30 percent in the past five weeks to 38.5. During the peak of the credit crisis the VIX reached just shy of 90. Historical readings have shown that a level of 20 represents substantial volatility while over 30 is considered very high. Investors are beginning to look for buying opportunities as the VIX moves lower and confidence returns to the market. A lower VIX, above consensus first-quarter corporate earnings and increasing volumes will potentially steer the market away from its March lows.
Yesterday we recommended a Buy/Write strategy for BHP. We mentioned the Chinese growth figures which were expected to come in around the 6.5%. The figure was 6.1% and initially disappointed the market with BHP falling below $33.00. On reading the reports it was obvious that January and February pulled the figures down substantially and that March was very strong. The stimulus package is working and confidence in the Chinese economy is growing. Their exports will continue to lag as the rest of the world drags itself out of recession. We stick by yesterday’s BHP call and maintain resources should do well in the medium term.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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