A military coup and the continuation of the Euro crisis couldn’t hold back stock prices from going higher. The holiday shortened session was just that and uneventful. While we enjoy the price action it is hard to put much behind it due to the shortened session. We did get a slew of economic data. Positive economic data from initial jobless claims and ADP employment report helped boost pre-market futures off the lows. The final 75 minutes of trading saw the market blast higher only to sell off in the final 40 minutes. What fun. Friday will bring the excitement level up a few notches. It is best not to pay attention and focus on price as we look for confirmation of a new rally.
I caught something from CNBC that caught my interest. The close of the second quarter was the best start of the year since 1999. Out of curiosity I wanted to compare the start of 2013 to 1999 and see if there were any similarities. One thing did stick out and that was volatility. Volatility measured by the Average True Range was much larger in 1999 than today. Sticking with the NASDAQ the average ATR in 1999 was 48.97 while in 2013 it is 29.14. Leads you to ask whether or not higher volatility brings you greater returns? Through the first half of 2013 the NASDAQ is up 12.71% while in 1999 the NASDAQ was up 22.5%. It appears the masses would rather give up on higher returns in favor of lower volatility.
Here is a chart of 2013 head-to-head with 1999:
The S&P is a similar story, but one where volatility seems to matter less. Given the dotcom bubble of the NASDAQ volatility doesn’t appear to be much of a factor. The Average ATR for the SPX this year is 12.52 while in 1999 it was 17.07. For the first half this year the S&P 500 was up 12.63% while in 1999 it was 11.67%. Interestingly enough the 3rd quarter for the S&P 500 in 1999 was not a good one whereby the index dropped 6.56% only to rebound in the 4th quarter by 14.54%. Will our current market mimic the same action seen in 1999? We’ll let you dance to the song sung by the artist formerly known as Prince.
Have a great Fourth of July and stay safe.
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