Last week the CBOE S&P 100 Volatility Index (VXO – Original VIX) had a 1 day increase of over 50% on 2 occasions. Since the inception of the VXO in 1986, 1 day gains of greater than 50% are very rare, having been observed only 8 times previously. An increase... Show More
I note that last night the CBOE S&P 100 Volatility Index (VXO – Original VIX) fell by over -25%. Since the inception of the VXO (1986), 1-day falls on the southern side of -25% are very rare, having only occurred on 11 previous occasions. Interestingly, post these large VXO declines,... Show More
The All Ordinaries Index has a regular positive bias over the last 3 trading days of the calendar year. Since 1980, the market has produced positive returns during the last 3 trading days of the calendar year on 33 from 37 occasions. Show More
I note that December has delivered its usual upward bias with the S&P ASX 200 Index (XJO) gaining 1.71% for the month with 6 trading days till month end. I also note that yesterday marked a new calendar year closing high for the S&P ASX 200 Index. Interestingly, following a... Show More
I note that the last 8 trading days of the calendar is inordinately Bullish for the All Ordinaries Index, producing an average gain of 2.19%, with a positive result on 31 occasions over the past 37 years. The return skew of 20 gains greater than 2% versus only 1 loss... Show More
I note that the worst monthly return of 2017 for the S&P 500 Index was a loss of -0.04% way back in March. Interestingly, over the past 100-years, December has never produced the worst monthly return of the calendar year. History is certainly not on the side of market prognosticators... Show More
At the end of November, the Dow Jones Industrial Average (DJIA) had recorded 8 consecutive calendar month increases. Since 1914, a monthly winning streak of this length is very rare, having been previously observed on only 7 independent occasions. Show More
I note the all-time-high in the Dow Jones Industrial Average (DJIA) overnight on Tuesday marks the 60th all-time-high this calendar year. 2017 now ranks as having the 4th highest number of all-time-highs over the past 100-years. Show More
"The increase in volatility is extremely common at market tops and a warning bell is in play after the parabolic type moves at the end of the market cycle." The academic evidence tends to disagree. In their April 2017 paper entitled “Can We Use Volatility to Diagnose Financial Bubbles? Lessons from 40 Historical Bubbles”, Didier Sornette, Peter Cauwels and Georgi Smilyanov examine price volatility before, during, and after financial asset bubbles in order to uncover possible commonalities and check empirically whether volatility might be used as an indicator or an early warning signal of an unsustainable price increase and the associated crash. Somewhat contrary to previous academic and practitioner claims, the main finding of this paper is that there is no systematic evidence of increasing volatility as a diagnostic or an early warning signal that a bubble is present and or developing. Sometimes volatility does tend to increase, other times it decreases before a fall, and most of the time volatility barely changes as the bubble develops towards its end.
The turn of the month effect is not just a November anomaly. http://www.cfainstitute.org/learning/products/publications/faj/Pages/faj.v64.n2.11.aspx
After taking out the 2 maximum gains (1997 gain 10.59%, 2008 gain 11.08%) the data still passes muster producing an average 5-day return of 1.03% with statistical significance at north of the 1 in 10 level.
The return of 2.17% for the 20-day forward interval is over 4 times that of the average 20-day return for the All Ordinaries Index from 1990 to 2013 of 0.45%. Also, your conditional win rate of 90% is significantly higher than that of any random 20-day interval of 59%.
The return of 2.92% for the 15-day forward interval is 6 times that of the average 15-day return from 1990 to 2013 of 0.48%.