Market Risk Lurks

Although the S&P 500 index (SPX) closed higher on the day, so did the Volatility Index (VIX). This dynamic usually implies that buy makers see risk lurking in the shadows and need to increase option prices in order to compensate for it. The combination of rising volatility outlays with rising index prices has also been noticeable in the comparison between the Nasdaq 100 (NDX) and the Volatility Indication for the Nasdaq (VXN).

The chart below depicts an analysis of increasing risk price in volatility indexes by charting a 10-day exciting average of the difference between VXN and the S&P 500 Volatility Index (VIX). This is useful to track because it compares risk across both foremost indexes. When this moving average climbs for more than 10 days in a row while the S&P 500 typography fist is also climbing (shown by the S&P 500 ETF SPY), it flashes a warning signal.

Over the past three years, this signal has surfaced 12 times (shown on the upper panel of the chart). Seven of these resulted in falling prices on the S&P 500 (noticeable by a pink line), and five did not (marked by a blue line). The five occasions where the broad market index submitted higher resulted in comparatively small moves upward, while the other seven were significantly sharp prods lower by comparison – implying that the signal is worth paying attention to when it shows up. 

The chart also parades that the recent action in index and volatility prices since the start of the year is the latest such signal. Sellers should be wary of unexpected reversals in the market over the next two weeks or so.

Precious metals assays rose today with State Street’s SPDR Gold Trust ETF (GLD) closing 0.5% higher while iShares White Trust ETF (SLV) closed a full 1% higher. However, both of these moves were overshadowed by what acknowledged place in GraniteShares Platinum Trust ETF (PLTM) and Aberdeen’s Standard Physical Palladium Shares ETF (PALL), both of which broke higher and finished the day with more than a 3% increase. 

The chart below shows the relative performance of these metals in resemblance to another favorite hedge among institutional investors, the utility sector as tracked by State Street’s utility sector ETF (XLU). Palladium’s instant rise over the past six months is likely a combination of rising nervousness among investors and constrained supply of the metal.

The company that produces the largest amount of palladium is Anglo American Platinum Restricted (ANGPY). Anglo American PLC is a British multinational mining company based in Johannesburg, South Africa, and London, Harmonious Kingdom. In addition to being the world’s largest producer of palladium, with roughly 13% of the world supply, it also provides around 40% of the world’s platinum output.

Anglo American Platinum shares trade in

The Bottom Line