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Stock Market Volatility Drops Ahead of Q4

Stock-Markets / Stock Markets 2015 Sep 11, 2015 - 11:03 AM GMT

By: Donald_W_Dony

Stock-Markets

Following the September 2, 2015 Market Minute titled "Likely bottom for the S&P 500", the key volatility indexes continue to crest ahead of the bullish Q4 period.

The volatility indexes for the S&P 500, Dow Jones Industrial Average and NASDAQ all appear to have peaked over the last week.


The VIX has dropped from 28.03 to 24.95, the VXD has pulled back from 28.03 to 24.37 and NASDAQ's volatility index has slipped from a high of 30.20 to 26.50.

Although these levels are still elevated and indicate some volatility in the weeks to come, they also suggest that the worst is over.

Bottom line: The recent spike in the main volatility indexes were suggesting that the underlying markets were starting another correction.

However, as the peaks for the VIX (S&P 500), the VXD (Dow) and VXN (NASDAQ) appears to be in-place, volatility should gradually to subside which is bullish for the markets.

Another important marker besides the key volatility indexes cresting is the near-term arrival of 4th quarter. This timeframe has historically produced positive returns for the U.S. indexes.

Indeed, the average return for the S&P 500 for Q4 has been 7.4% from 1971 to 2014.

With volatility starting to crest, we anticipate the markets are setting-up for a typical Q4 advance.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2015 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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