Account
New to ADSS? Open an
account now to get started.
Already have an account?
Add funds to your ADSS account
Account
New to ADSS? Open an
account now to get started.
Add funds to your ADSS account
Asset Watch
Thursday, August 8, 2024
The train went off the tracks on August 5, as global financial markets suffered major derailments. The Nikkei 225 sunk by over 12%, and the overnight selling spree helped sink the NASDAQ 100 and S&P 500. The Cboe Volatility Index (VIX) also surged near 65, and the fear was palpable. But is that a good thing?
RBC Capital Markets noted on August 5 that historical bouts of volatility have rewarded the optimists. The team wrote, “The S&P 500 is a buy on a 12-month forward basis when the VIX is above 35.”
A spiking VIX often signals capitulation. So, while the S&P 500 may correct further, the index is usually higher when looking out 12 months. Therefore, traders frequently benefit from extended time horizons.
While RBC also opined that 5,100 was key, the S&P 500 bottomed near 5,120. The level is only slightly higher than the 10-month moving average (the blue line), a solid trend indicator over the last several years.
As a secondary source of support, the 15-month MA (the yellow line) has been a reliable anchor. In October 2023, a breakdown below the 10-month MA was bought near the 15-month MA. There were also instances in 2018 and 2019 where similar events occurred.
The level is even more critical because the 4,880 area is near the S&P 500’s January 2022 highs (marked by the horizontal white line). Together they create a powerful support combination that should hold if the 10-month MA falters.
For short-term traders, the outlook is less certain. Prior corrections near the 10-month MA resulted in retesting the lows later or making new lows, which may mean the August 6 optimism was more of a relief rally.
While pullbacks often brighten the long-term outlook, caution may be warranted for those trading hourly or daily charts.
ADSS
8th floor, CI Tower
Corniche Road
PO Box 93894
Abu Dhabi
United Arab Emirates
Trading Services
ts@adss.com
+971 2 657 2414
Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC – S.P.C (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates under First Category: Dealing in Securities and Fifth category: Arrangement and advice (Introduction). ADSS is a Limited Liability Company – Sole Proprietorship Company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
