02/08/2021 — Looking For An Excuse

Now that GameStop nears its eventual and proper resting place, back under $20 dollars a share, the market continues a steady climb higher. Fears of small bandings mounting a series of financial revolts have — for the moment — subsided, as the attempt to run up the price of silver (SLV: iShares Silver Trust) has proven a more difficult task than tossing around a comparatively lightweight, distressed stock.

In fact, it makes sense that a stock issued by a company would be harder to manipulate than a digital currency, and that a metal that has been traded for thousands of years, in one form or another, harder still. The market often acts in ways that seem irrational, but usually some of its fundamental underpinnings bring it back to more sensible behavior.

But I digress. As the market rises day by day the pressure on volatility grows. Although potential bright spots in the economic outlook begin to shine through, there’s still a lot of tunnel to be traversed before the light is reached. The ever present specters of a pandemic that lingers and societal strife threaten to derail the bull market at any moment. A ridiculous influx of cash that more closely resembles speculation than investment, and a zero interest rate provide a counterweight to the pessimism. Either way, the resulting market rests on a razor’ edge.

Up at all time market highs, a 10 point drop in the S&P’s that occurred rather slowly from 9:45 to 10:30 this morning was enough to move the VIX higher by half a point. The 20 point rally that crept slowly higher the rest of the day sent the VIX down a full point. Although these volatility moves pale in comparison to what the market expects of late, with respect to the puny percentage that 10 points constitutes in the S&P index, they shouldn’t be disregarded. For small and gradual moves like these, it should be noted that the market is a bit twitchy.

Some of the jitters lay in trading at all time highs in the midst of a recession, but the events of the past couple weeks have commanded that we examine other reasons. Perhaps the unprecedented amount of new trading accounts opened and the record volumes drive this sense of unease in the market. It would make sense.

It feels as if the market were looking for an excuse to burst the dam and reopen the floodgates of volatility. If anything out in the real world fuels that fear, even in the slightest…look out below.