Talk About a Short Covering Rally…
9 of the 10 largest gainers in the S&P 500 yesterday were in stocks which were down over 35% over the past three months. Talk about a short covering rally…
Two shocks to the system in the past 90 days and with the bull market now 5 ½ years old extra caution has to be applied heading into 2015. Multiple spikes in volatility doesn’t always lead to major market reversals but chasing high volatility stocks and investing abroad (a bad bet made this year by many brokerage firms selling international mutual funds to their customers) is not the place to be. Staying with high quality companies and healthy levels of cash is the best course of action from here.
The market is now short-term slightly overbought after yesterday’s rally. The VIX is still above 19 which indicates participants expect higher short-term volatility to continue.