26 October 2017: Turbulence

Yesterday was a turbulent session for stock markets in the US. Shortly before the lunch break, it was unclear what was going to happen. The volatility index had rapidly gained almost 20% and you could sense the insecurity among investors. In the hours after lunch, markets recovered from most of the losses. But to many traders it was clear that we had moved close to the edge of a cliff around 12 o’clock.
What happened yesterday could be interpreted in two ways. Bulls will cherish the second part of the trading session: “I’ve told you: this bull market is very strong and resilient!” Bears will be very happy with what the morning hours brought: “Look, the party is over. This is an ominous sign of more bad weather that is coming up.” We will see what is going to happen the upcoming days. But the lightheartedness of the last couple of months took a blow yesterday, so much is clear.

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US stock markets closed lower on Wednesday following a string of disappointing earnings results. The S&P 500 dropped 0.47%, the Dow tumbled 0.48% and the NASDAQ declined 0.52%. Volatility was on the rise. The VIX gained as much as almost 20% during the trading session, but had almost lost all of that at the end of the day. It closed only marginally higher: +0.6%. UVXY ETFs gained as much as more than 20% in the first hours of trading, but they had to settle for a gain of ‘only’ 6.5%. XIV ETNs dropped just over 3%. A substantial part of that loss took place at the opening of the session.
Danny Daredevil made a gain at the beginning of the session, because he was holding UVXY ETFs at the opening. But after the sell, he lost a little more than he had gained with the sell of UVXY ETFs. His RSS closed at just under 14%. Adventurous Anny bought XIV ETNs at the beginning of the session. She had to take a small loss and her RSS dropped to 6.6%. Solid Suzy and Lazy Larry were not very happy during yesterday’s lunch, but their mood improved drastically during the afternoon, when XIV ETNs minimized their losses. Suzy and Larry saw their RSS drop to 56%. Their AAR is still above 100%.
None of our models gave a trading signal at the end of yesterday’s session.

Model  Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil XIV 1 January 2016

13.78%

-71.77%

-18.33%

7%

Adventurous Anny XIV 6 March 2017

6.63%

6.63%

-1.73%

11%

Solid Suzy XIV 6 March 2017

56.49%

56.49%

6.98%

101%

Lazy Larry
XIV 6 March 2017

56.49%

56.49%

6.98%

101%

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

 

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At the car dealer.
A couple of things they didn’t have there, say twenty years ago.
Or at least were not very common back in those days.
Wifi.
Darn good coffee.
Winter tires.
Ready while you wait.