Around lunchtime Tuesday traders were talking about the latest declines in the Vix. Wall Street’s fear index has now dipped below 30 for the first time since September.
Historically, when the VIX has crossed below and closed below 30, the S&P 500 has, on average, gone up 6% in the following 6 months.
How should you be trading?
There’s no doubt that big traders perceive less risk in this market, muses OptionMonster Jon Najarian. Volumes have calmed down substantially. But as a trader, I’m concerned that if too much volatility comes out, we might see a dull summer.
Yes it could mean a dull summer, echoes Jeff Tomasulo of SMB Capital. We could be trading in a range. Or it could mean we have a trended market where stocks make higher highs and higher lows over the next several months.
Don’t forget that relative to history the Vix is still high, adds Dan Fitzpatriock of StockMarketMentor.com. Just not as high as it was 6 months ago.
It’s ironic that when the Vix was in the 60’s investor were wishing for the Vix to come down, muses Fast Money trader Guy Adami. Now it is down and traders complain without volatility stocks won’t move as much.
OBAMA UNVEILS FUEL ECONOMY STANDARDS
On Tuesday, President Obama announced the most aggressive proposal for increasing auto fuel economy standards ever and the first plan for regulating emissions, the White House said.
The proposal requires the U.S. passenger vehicle fleet to average 35.5 miles per gallon by 2016, saving 1.8 billion barrels of oil. It would also instruct the Environmental Protection Agency to regulate tailpipe emissions.
If you’re looking to trade the news, look at Borg Warner, counsels Guy Adami. That’s where I think you want to be. Or you can look at Honeywell , he adds. And I like Eaton , but they have a tendency to miss.
Or check out AutoZone and O'Reilly, adds Dan Fitzpatrick.
TAKE YOUR POSITION: H-P LEADING TECH HIGHER