When Markets Are Quiet, Prepare Your Next Move

PERSPECTIVES: When markets are at their most uninteresting, like they are now, it can also be the best time to prepare for the next move

Michael van Dulken 17 August, 2012 | 7:00PM

I don't buy into the "But the markets aren’t doing anything" argument. Yes, August is traditionally a quiet month with many taking holidays and volumes falling in accordance. The VIX Index (US fear gauge)--which is based on the implied volatility (market expectations of stock market movement) of the US S&P 500 Index over the next month--has also fallen to pre-crisis levels, when markets were trending ever-higher, recovering from their tech bubble bust lows. However, lately markets have sneakily made multi-month highs. In some cases, they have made multi-year highs. Any pullbacks have also failed to undo much of the ground gained. So far, things look positive. 

The reasons behind this are two-fold. Markets are in a wait-and-see mode. Waiting for news on more monetary stimulus from major central banks to help reboot economic growth, and for the next move on a eurozone debt-crisis resolution as  politicians return from their summer breaks. This combo has kept downside risk limited. Bad macro news has maintained hopes of monetary stimulus. A sprinkling of good macro news has tried to negate this, but there hasn’t been enough to rule it out completely. Anyhow, good macro news is what we want anyway, so the net result is positive. 

On Europe, we've still to hear more about the European Central Bank's (ECB) pledge to do whatever it takes to help Spain/Italy. We've also to see if Spain throws in the towel, or if Greece gets to change its bailout rules again. Much to come, much to move the markets, much to please short-term CFD and Spread bet traders. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BHP Group PLC1,737.80 GBX0.56
KAZ Minerals PLC639.80 GBX0.28
Petrofac Ltd153.15 GBX-2.79
Premier Oil PLC21.70 GBX-1.36
Standard Chartered PLC463.70 GBX0.54
Standard Life Aberdeen PLC271.00 GBX0.44
United Utilities Group PLC899.20 GBX-1.64

About Author

Michael van Dulken  is head of research at Accendo Markets, an online trading services provider offering CFDs, spread betting and forex to retail (private) clients.

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