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A lot of people have been assuming because the VIX is low, the put/call ratio is low, etc., that it means no fear is in the markets, so we will go straight down.
In fact, the VIX is just settling down into the range it was in before Internet stocks spiked up volatility incredibly in the late '90s. And there was so much cash on the sidelines prior to the election that this money is still being put to work into the markets, regardless of the fear/greed psychology of the marketplace. Fear can be faded, as we saw countless times when panic levels got too high in the bear market and the markets snapped back with fury. But hope has a tendency to persist.
James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and the upcoming Trade Like Warren Buffett. At the time of publication, neither Altucher nor his fund had a position in any of the securities mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback and invites you to send it to james.altucher@thestreet.com.
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