Are Volatile Markets The New Norm?

circle-st-icon

Cody Huelster

Oct 11th 2022  .  3 min read

Volatile Day Closes Red Again

As the opening bell sounded, tech giants began to sell off quickly, setting a bearish the tone for the overall market. The selling pressure in the Nasdaq sent the index to a new low on the year; meanwhile, the S&P 500 futures followed closely but failed to break 3,571.75. It’s safe to say when Apple, Google and Amazon are selling off, so goes the rest of the market.

The market fights to get positive

The markets ultimately found a base before turning around and heading back up. While the bottom was being set, the Volatility Index (VIX) and the U.S. Dollar Index ($DXY) provided early signals for a reversal.

The VIX steadily rose as the market was heading lower in the early morning of the cash session. This year, the Volatility Index has found resistance in the 34 to 35 range. This year’s short-term bottoms were found in the market when the index approached this critical area on the chart. Once again, the market bounced hard off of VIX, rejecting 34. The market was set to rally by pairing the VIX with the $DXY taking a hard fall. 

The market spent the next couple of hours trending aggressively to the upside. Technology leaders that were once weak took back the reigns of the market and trailblazed the way higher. The S&P 500 futures traded back up to the June low of 3,639 and even pushed through it. This is where the market found exhaustion to the upside and started to trade sideways for a while.

Market turns back around

News broke when it looked like the market would settle near the highs. Andrew Bailey, the Chief Executive Officer (CEO) of the Bank of England (BoE), came out and said that there is a “serious risk to financial stability in the U.K..” 

This news sent the market free-falling 60 points in the S&P 500 futures. Many traders miss big opportunities like this one due to falling out of sync with the market as the day progresses. Chandler Horton, Director of Day Trading Strategies at Simpler Trading, emphasizes the importance of staying in sync to remain in the “opportunity flow.”

Staying sharp and focused for an entire session can be grueling but knowing when and where to look can keep you in the best position to take advantage of opportunities like today. Chandler will cover what it takes to stay in the opportunity flow to maximize your potential in his upcoming class. More information on his free webinar on opportunity flow can be found here

With the rollercoaster-like price action, being ready for anything to happen in the market has never been so important. This volatility is not going anywhere, and tomorrow’s economic data will add to it. 

Economic reports for Wednesday

Wednesday will have both the Producer Price Index (PPI) and the Federal Open Market Committee (FOMC) release to shake things up. PPI will be reported before the market opens at 8:30 a.m. Eastern. FOMC will take place at 2 p.m. Eastern.

Market closes for fifth consecutive day

At the market close today, the Nasdaq and the S&P 500 were negative at the end of the session. The S&P 500 futures closed down 0.63%, losing 22.5 points, while the Nasdaq futures closed down 1.16%, a loss of 127 points. The Dow did not follow suit, closing up 0.09%, adding 27 points.