18 August 2017: More fear

The terror attacks in Spain had their impact on the stock markets. While they were still recovering from the North Korea crisis of last week, investors were gripped by fear caused by a threat from another source: Islamic State. Of course, the VIX, the so-called fear index, immediately responded: it had just dropped below 12 points the day before and now shot up again and reached almost 16 points, a rise of almost a third. The relationship between what happened on the other side of the Atlantic and the business performance of US companies is not straightforward, but that is not highly important. With the current high valuation of stock prices, anything unpleasant or surprising will bring stock prices down and the VIX will rise dramatically as a result. (And, as was emphasized in this blog less than a week ago: after a couple of days, and likely after the weekend, stock prices will very likely recover from their losses and the VIX will drop.)

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The events in Spain brought major US indices down. The Dow dropped 1.24%, the S&P 500 lost 1.54% and the NASDAQ closed 1.94% lower. Volatility rose sharply. The VIX gained 32%. UVXY ETFs went up and closed 33% higher. XIV ETNs lost 16%. Our models had to take another blow, after last week’s entanglements concerning North Korea.
Danny Daredevil‘s RSS dropped to 122%. Also Adventurous Anny recorded a significant loss and her RSS stayed only just above 0%. The return since their start for Solid Suzy and Lazy Larry dropped below 10% and closed at 7%.

Model  Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

121.55%

-45.04%

-49.10%

63%

Adventurous Anny Cash 6 March 2017

0.32%

0.32%

-27.65%

1%

Solid Suzy XIV 6 March 2017

7.23%

7.23%

-14.33%

17%

Lazy Larry
XIV 6 March 2017

7.23%

7.23%

-14.33%

17%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

Two of our models gave a trading signal at the end of yesterday’s session: Danny Daredevil and Adventurous Anny. Danny switched from XIV ETNs to UVXY ETFs and Anny traded her XIV ETNs for cash at the opening of today’s session.

 

 

RS_v05-smallRené’s Reflections @ Friday: A goodbye

Today, I attended the funeral of the mother of a good friend. She reached the age of 84. The last two years of her life were overshadowed by the fight against that dreaded disease we all hate to hear about. She endured seven chemo treatments, lost a lot of weight as well as her physical condition, but she always kept her smile and optimistic look at things. She was a fun person to hang around with, a gentle and generous spirit, always in for a joke. During the second World War, she lived as a child in Beverwijk (a city in the province of North Holland). She then had an age old enough to have vivid memories of that period until the day she died. Memories that she loved to share with anyone who would listen. Despite the war, she had a happy childhood in a big family with many brothers and sisters. It was a time when beauty and joy was in small things, and humor was found in all things. Once she started talking about her childhood and her traveling lifestyle as a young adult in the 1950s, she could go on for hours. She was a woman with many stories.
On one of my last visits to her, we talked about the transiency of human existence. Knowing all too well that her time was about to come, she said with a deadpan face, “If heaven exists, René, and I somehow manage to get in, then I will make sure to reserve a very comfortable seat for you.” I hope that last one was not a joke.