A powerful two-month rally for U.S. stocks has likely come to an end, market watchers say, with the so-called fear index signalling an upcoming bout of volatility.
The classic signs pointing to investor skittishness are all there: The stock market is selling off, the price of gold has surged back above US$1,480 per ounce after trailing off in November and the fear-gauging CBOE Volatility Index has rallied 27 per cent in the past three days. According to Larry Williams, a trader and author who maps out the VIX, this rally has the potential to endure through the winter, which likely means that the market is set to suffer.
Projecting out the VIX allows a trader like Williams to measure both cycles and emotions — and if he knows which way the market may be leaning, he can plan accordingly. And he has. He’s taken his portfolio into cash and only remaining long on precious metals such as gold and silver while waiting for a re-entry point.Larry Williams, trader and VIX mapper The S&P 500 was long overdue for a correction, according to Sven Henrich, founder and lead market strategist at NorthmanTrader.