Dow Struggling As the Session Wears On
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The U.S. stock market is struggling today. After opening higher today, the stock market has moved between gains and losses, in a relatively tight range. Right now, the Dow is barely in the red, while the Nasdaq and S&P 500 retain their tenuous holds in the black.
Right now, stock market indicators are pointing to increased fears, especially the VIX. The volatility index is rising, but it does not appear that fear is really rising. MarketWatch reports on an interpretation of the recent changes to the VIX:
“What’s happened is that enthusiasm to increase equity exposure has dropped off in the past two to three weeks, but there’s not really any fear, just less optimism,” said Ken Tower, market strategist at Quantitative Analysis Service.
A sustained rise in the VIX usually accompanies selling pressure, and the gauge usually spikes higher when investors panic. The index is made up of the prices of a range of options which investors buy to hedge their bets. When these options are more in demand and their prices rise, it normally indicates rising nervousness.
Really, though, it appears that the main force behind selling pressure on the stock market is more to do with a reduction in optimism. More and more, the evidence is pointing to a long economic recovery. Reports that the recession would come to an end and be immediately followed by a substantial recovery have been largely discredited. Instead, it will take some time for the economy to overcome the current recession. Even after the recession ends, it will take some time before the economy moves back toward acceptable growth.
Additionally, tomorrow’s Fed announcement is awaited by investors. There probably won’t be any major moves on the stock market until after the Fed concludes its meeting (which started today and continues until tomorrow) and makes some sort of announcement about economic health and plans going forward.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
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