Volatility has hit the markets to the point that the VIX (see chart here) aka the fear gage has broken out. Stocks have been on a tear as of late but unfortunately to the downside. No one is surprised that the markets have become extremely volatile due to the Russian invasion of Ukraine. The Dow Jones Industrial Average (see chart here) fell over 10% since the crisis began as has the S&P 500 (see chart here). Both the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here and below) have sold off closer to 15% before bouncing off of their sell-off lows. Again, no surprise that vol has spiked to almost a double over the past few weeks as tensions increased.
Before we get into the technical shape of the markets it’s hard for me to even talk stocks and indexes due to the atrocities happening abroad. Our prayers go out to everyone in the Ukraine that is being affected by this invasion and for the people of Russia who wants no part of this. Hopefully very soon a cease fire will happen and happen for good!
Now let’s look at the technical set-up that has occurred since the buildup and invasion with the aforementioned key indexes. Starting with the Dow Jones Industrial Average (see chart here). The Dow a few days ago hit a low of 32272 and has bounced to the 34,000 zone. There is much more work here to be done before the Dow can recapture its 100 and 200-day moving averages. The same can be said for the S&P 500 (see chart here) although with the S&P, it is closer to its 20-day M/A than the Dow Jones Industrials Average. Interestingly both the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) have bounced off of their recent lows stronger with the Russell 2000 recapturing its 20-day M/A. Despite the recent bounces off of their sell-off lows I think it is fair to say that we are not out of the woods yet in the volatility we have seen as of late. If you are a long-term investor, this will pass at some point in time. For experienced traders this is an environment where money can be made both on the long and short side of the markets. That said, I always recommend consulting your certified professional financial advisor(s) before making any moves in the backdrop we currently find ourselves.
Good luck to all 🙂