Volatility: Indicator of Market Movements

The past several months have been dominated by news that rocketed the market up and down. Volatility had reached an all time high. Nothing was for certain. The market was run by fear alone. All greed and optimism was lost. Now, volatility is down. The market is moving in short increments. Most importantly, quantitative data has been moving the market lately instead of just news. As a result, confidence has risen and optimism is slowly coming out of the shadows.

Although volatility has dropped, it is still high compared to historical standards. We have a long way to go to get rid of the fear and instill greed again. As volatility slows further, we can bet that the market is moving up as greed regains its hold over money and all that comes with it. I am not saying that greed is bad. It is now that we need to be greedy. We need to be mindful that greed will only take us so far before it takes over us.

The market is moving on earnings data and economic data. These are the things we need to move the market in a quantitative and intelligent manner. A lot of people are worried, including myself, that they have missed the movements in some companies. The S&P has risen over 20% so yes, there are companies that have risen too fast too quick. However, we need to remember that the Dow is still down 6000 points from its high. I would want to miss a little movement in the market and then buy rather than buy and see the market fall again. If you think the stock is still too high, wait for a pullback and then get in. Timing the market will give below average returns and stress that we do not need in our lives. We have to look toward the long term because that is how we will make cash money.