When will the equity market find a bottom? Are positive technical signs pointing to a bottoming in the equities market?
27 March 2020 | HYCM – Ok, no-one knows when the equity market will bottom, but it is worth doing a quick comparison to the 2008-2009 financial crisis to look for clues. One place to look at is the Volatility Index.
What is the VIX?
VIX is derived from the price inputs of the S&P 500 index options. Hence, VIX showcases traders a way to measure of the market risk as well as investors’ sentiments. Since it shows market risks, VIX is also called by other names such as the “Fear Gauge” or the “Fear Index.” Therefore analysts, investors and portfolio managers often keep an eye on VIX values, in order to measure market risk, market stress, and fear before they take any investment decisions. To portray an example of one of such investment decisions; when people feel less fearful then often they step back into the equity market.
Look at the SP500
Look at the FTSE 100
Look at the Nikkei
So, in answering the question, ‘when have stocks bottomed’, remember the VIX. It may very well provide the guidance for when a bottom in the equity market is finally in and when a sensible time to buy is.
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