It seems broad willingness to take on more risk has helped stocks charge higher. But that could turn on a dime. How will you know?
As OptionMonster Jon Najarian has been telling you, Wall Street’s favorite measure of fear – the Vix – has been quietly sliding lower suggesting that investors are growing more comfortable with this unpredictable market.
And less fear triggers an increased tolerance for risk.
You can see that sentiment reflected by moves in the dollar and yen; two currencies considered low risk. Both had risen against the euro on safe-haven buying.
But now they’re down against the euro as well as a basket of currencies. That suggests risk taking has returned.
What’s the trade?
I’d keep an eye on the euro/yen cross, explains Schottenfeld trader Lucas Rosen. I think it’s a risk barometer. When you see the cross start to move higher, money starts flowing, and stocks start moving higher.