Posted by: jhamon | October 8, 2009

MysteryHedgie: Bouncing Off The Trendline

MysteryHedgie observes: SPX bouncing off the trendline…

The vigorous bounce in markets from their “March reflation trendlines” touched last Friday (see SPX chart below; many asset markets look similar) raises the possibility that the combination of normally bullish November and December for equity markets, easy earnings comps basis last year’s dreadful Q4 and continued government stimulus result in higher volatility “lift-off” rather than a gentle grind. Out of the money call options, many priced below realized volatility levels, represent great value if you believe this scenario is a possibility. For those comparing the March 2009 low to the historic July 1932 low, it should be noted that stocks advanced 87% over the next 10 months (versus the present 60% in SPX) even as unemployment rose to it’s 24.9% peak in 1933….

SPX Bounces From TrendLine

SPX Bounces From TrendLine

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Responses

  1. […] MysteryHedgie: Bouncing Off The Trendline « Outside The Box fractalbox.wordpress.com/2009/10/08/mysteryhedgie-bouncing-off-the-trendline – view page – cached The vigorous bounce in markets from their “March reflation trendlines” touched last Friday (see SPX chart below; many asset markets look similar) raises the possibility that the combination of… (Read more)The vigorous bounce in markets from their “March reflation trendlines” touched last Friday (see SPX chart below; many asset markets look similar) raises the possibility that the combination of normally bullish November and December for equity markets, easy earnings comps basis last year’s dreadful Q4 and continued government stimulus result in higher volatility “lift-off” rather than a gentle grind. Out of the money call options, many priced below realized volatility levels, represent great value if you believe this scenario is a possibility. For those comparing the March 2009 low to the historic July 1932 low, it should be noted that stocks advanced 87% over the next 10 months (versus the present 60% in SPX) even as unemployment rose to it’s 24.9% peak in 1933…. (Read less) — From the page […]


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