As the seasonally strong March period is now in full gear for stocks, I cannot help but wonder whether the highly volatile period of February will continue. That is a big question, and has many on the sidelines wondering if the roller coaster ride may begin again. As we watch the action day by day, we have seen some very choppy price movement, which is typical after such a volatile run.
The market is trying to discover price, and with such dramatic movements and wide ranges it takes some time. On the SPX 500 chart we notice a strong 'higher low' has been established and confirmed. This is important for the bulls, but this recent move up has been on strong turnover. That tells us big institutional players are coming in to support prices. The big money is where the action is at, and this signals this market run may have some staying power.
Volatility has declined sharply over the past couple weeks, save for a few days last week when the news cycle was dominating the action. The VIX, or the fear gauge has fallen from the highs seen in February and is now as low as it has been since the February slide started. The index sits around 15% after reaching near 50% just over a month ago. It's been quite a ride from the teens in January, and a market that showed absolutely no fear whatsoever.
While several other sentiment indicators (put/call, breadth, new highs/lows) are in agreement with a declining VIX, the price chart is only just showing signs of potential movement. One day does not a trend make of course, so we'll be looking for some follow-through. We have a bit of a short term overbought condition after a stunningly strong week.
With a Fed meeting to coming later in the month there might be plenty to worry about of course, but let's just take it day by day here.