Friday, May 13, 2016

What Lies Beneath: The Volatility Explosion Fund

This is the low volatility fund. What else could it be? The last two times it rolled over (August, January), volatility exploded...

The August Flash Crash wiped out five years of gains, a harbinger of what comes next:

At the start of last week, inter-market trends continued to suggest risk-on conditions were present. As the week progressed, however, some significant deterioration began to take place. Something looks off here.

momentum appears to have stalled.

Perhaps more troubling? Take a look below at the price ratio of the PowerShares S&P 500 High Beta Portfolio relative to the PowerShares S&P 500 Low Volatility Portfolio ETF SPLV, You want to see this ratio trend higher in a bull market

High Beta (black). "Low volatility" (red):

Fifth wave overthrow:
When the "low volatility" fund rolls over, the market tanks...

The world's largest stock by market cap has breached its support line on news that iPhone chip shipments are down -70%