This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Global Macro: Trading the Information Void

NEW YORK ( TheStreet) -- The summer is coming to an end, which means we are on the last leg of light trading volumes and uncertainty over monetary policy.

As close as we are to the end, we are not in the clear just yet. The Federal Reserve meetings don't start for another few weeks, which means investors are left filling the information void by trading on perception rather than hard facts.

The lack of clarity has pushed volatility higher and led to a multiweek downturn in U.S. equities. The SPDR S&P 500 (SPY) seen below shows a break lower after consolidation at record highs, but the market has since stabilized.

Lighter volumes will continue to exaggerate price swings, and with both durable goods and Gross Domestic Product numbers out this week, extreme readings in either direction could cause large moves to the downside.

The issue with economic data in the current environment is that all readings are subject to any form of interpretation. If the data are wildly good, then investors can either view them as positive for economic stability, or view them negatively as justification for tighter monetary policy.

On the other hand, a very negative number could be viewed negatively as signaling economic weakness or positively as justifying further stimulus.

In either case, investors are left in the dark about what will happen. This has led to increased volatility in the market, especially since the much anticipated September Fed meeting is quickly approaching.

The chart below is of the CBOE Volatility Index, better known as VIX. The VIX bottomed in mid-August, then as equities spiked lower, the VIX inversely gapped upwards.

An exchange-traded security that closely tracks the price movement of the VIX is iPath S&P 500 VIX ST Futures ETN (VXX)

The VIX sits at elevated levels, but it still looks to have room for a move higher if markets react negatively to economic data this week. Expect volatility to continue in an upward trend.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,031.14 +43.63 0.26%
S&P 500 1,984.13 -1.41 -0.07%
NASDAQ 4,518.9020 -48.6960 -1.07%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs