You guys know I’ve been all over volatility, the realized and the implied kind, for a good part of this decade now. If you curious as to the reasons for my volatile obsession then the most salient one is that volatility is much easier to predict than signed returns. I’ve covered that topic in exhaustive detail over the past few years and today we’re actually going to put it to work.
Alright, you better grab yourself a tall cup o’ java or tea as this is going to be the most massive momo update of this year. And a rather tumultuous one it has been thus far, as it was literally plastered with nasty bear and bull traps. I personally think I’ve done a reasonable job of steering you guys through it, and aim to now bestow you with sufficient technical context to allow you all to greatly prosper in the final, most bullish, season of the year.
The eternal ebb and flow of realized volatility (RV) is a key concept in order to understand what has been happening in equities over the past week or so. For over six months now we’ve seen a marked increase in RV which in the process it has claimed numerous victims in both the bullish and bearish camps.
And not in a good way, I may add. I just checked the event log for the remainder of this week and it looks rather petrifying: Starting tomorrow one market moving event after the other, and given the current frailty in equities the potential for continued hilarity can not be ignored. FYI – I didn’t include the core consumption expenditures report today as that one will already be priced in by the time you read this.