October was certainly a month for the record books. Volatility isn’t at record highs, but it exploded in the month of October. As you can see in the following charts as measured by Average True Range (ATR) we haven’t seen this much volatility since the summer of 2011.
14 Day ATR:
20 Day ATR:
30 Day ATR:
It is easy to say this high volatility will lead to an epic fall in the market. However, given the move in Japanese pension funds moving billions into equities is it possible we just run away? Check out the late 90s where we had tremendous volatility yet the market exploded higher. Sure, the ending to the epic run wasn’t pretty. Why would we not want to take advantage of both sides of the run? We do. While v-shape moves are typically prone to failure it is quite possible we are on the verge on a massive run.
Be ready for anything in this market. We were taking long signals despite the v-shape move from the markets. It pays to stick with your trading plan and ignore your opinion of the market.
We hope you are having a great weekend.
Aloha
