Market Commentary: Lack of Volatility has Left Many Red Faced

The last 2 month have been very uncomfortable for most traders with dismal levels of volatility providing no acrobatic price action which is needed to provide good quality technical setups.  Most often traders are ill prepared for market conditions such as these and end up reaching a psychological breaking point.

There have been a number of variables which could have come into play presently which could explain why we might be seeing the lowest levels of volatility since the Financial Crisis in 2008. Firstly we are seeing an extended bull run which has been in place for a while. One piece of data I found interesting was the fact that the S&P 500 has recorded its 400th day above its 200 day moving average. 

As the index keeps going higher more participates get weary of the lofty the levels the market sits at and start off loading stock or simply hold onto current stock creating uncertainty and lack of any movement.

We have seen volatility pick up in the last 2 weeks or so but we can attribute that to the end of the 2^nd quarter and the 1^st half of the year. The fact that the 2 come together does allow some fund managers to adjust their portfolios and we'll begin to see volumes start perking up.  

There have been a few and fair amount of market commentators that have called for a correction in the last few months, much of which have proven futile in their quest to call the top. If there’s one trading philosophy which any trader or investor should stick too is that a market can stay irrational longer than you can remain solvent.

From a personal stance, my trading has remained subdued of late with not much opportunities presenting themselves and if an opportunity does come along the time it take to start working takes a while which would require a large degree of patience.  That I can say I have exercised well having experienced these types of conditions fairly early in my trading career and being able to identify them soon enough has helped me adapt to it.

I've found that in times like these some traders gravitate towards instruments with greater volatility such as forex and indices. This can prove rewarding if you have the right setups in place but you need to take note that these instruments suffer the same fate as any other instrument.  They also tend to be more leveraged which can lead you to take larger than expected losses.

If you are going to trade these instruments your trading style should start leaning more in the favour of higher probability setups together with accuracy. Obviously this is a trade-off we face and at times you will find stages of boredom and strain in place. Remember complacency is punished in these markets and you need to stay tentative to the goings and comings.

Alternatively you can take some time out and focusing on learning. Trading is a constantly changing game and if you’re not up to date chances are you falling behind.  There are heaps of new and existing techniques which can go further to enhance your edge and better prepare you for when the market does eventually start moving again.  

Finally pay close attention to price action. Lack of volatility negatively affects conventional indicators too produced false signals. When it comes to assessing where the market is going price action remains king.  

If you would like to contact me you can through my email at cadetrader@gmail.com or if you wish to follow me on twitter and get the latest updates of news, interesting commentary and general trends in the market, my twitter handle is @CadeTradeR if you follow this link it’ll take you directly to my twitter timeline: https://twitter.com/CadeTradeR