Investors dealt with reports of high inflation, rising interest rates, soaring energy, commodity and real estate prices. So what is the market saying about the markets investors have favored over the past two years versus where are they putting their money? right now?
One way to determine this is to simply plot the indices and then see how they compare to each other. Price data also needs to be viewed and analyzed in a multi-timeframe environment: short-term, medium-term, and long-term.
As a trader or investor, we know that it is important to determine if a market is in a bullish, bearish, accumulation or distribution phase. Additionally, we want to know how the market we are trading is performing against its peers.
The following charts provide snapshots of the performance of the SPY ETF (US S&P 500) against other US and global equity indices.
The year-to-date chart shows us a maximum volatility spread of 15.73%. It is simply the difference between the highest stock index Australia 200 +1.18% and the lowest stock index US Nasdaq 100 -14.55%. The Australian market has been doing well recently thanks to strong interests in the energy and commodities sectors, which in turn has helped the Australian dollar strengthen.
SPY year-to-date: peak volatility 15.73%
The volatility spread at first doesn’t seem that big, but over time it can be substantial. This is one of the reasons why our team continuously tracks global money flows based on each country’s stock market index, but also other types of markets and asset classes. Our quantitative trading research is crucial in determining which markets to trade in and how to effectively utilize trading capital.
This maximum volatility spread in 2021-2022 is 44.42%. Highest stock index, India 50 +23.75% vs. lowest stock index, Hong Kong 33 -20.67%. Stock markets in Hong Kong and China have been plagued with many Covid issues in 2020, 2021 and now recently again in 2022.
SPY 2021-2022 Daily: Maximum Volatility 44.42%
We can now have a longer term view of the past 2+ years covering Covid before and after. Note that the Nasdaq 100 is the overall leader despite its recent negative performance in 2022.
This maximum volatility for 2020-2022 is 89.70%. The highest stock index, US Nasdaq 100 +69.70% against the lowest stock index Hong Kong 33 -20.00%.
SPY 2020-2022 Daily: Maximum Volatility 89.70%
Knowledge, wisdom and application are necessary
It is important to understand that we are not saying that the market has peaked and is heading down. This article is to highlight some interesting analytics that you should be aware of. As technical traders, we only follow the price, and when a new trend is confirmed, we modify our positions accordingly.
Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.