S&P500 FALLEN BY MORE THAN 1% FIFTH TIME...

… in 2014. Which is not a disaster because the average amount is seven by the middle of March, but it is not a bullish sentiment sign neither. Honestly it means to me the 2013 bullish momentum is not existing further in the first three months of 2014. Just take a close look at the 2014 S&P500 chart. Is it a bullish chart? I doubt that. I would say this is a widely ranging volatile market. The pattern looks different than it was in 2013 when the upside strength was obvious.

The 1% or bigger daily drop is a significant rule of thumb. Between 1990 and 2012 there were on average 32 day per year with a 1% or bigger drop, so far in 2014 we have seen five. In the whole 2013 year the market had only 17 1% or bigger drop, and massively underperform the average 32.

I see two conclusions from these data:

• First the volatility has increased and much higher than it was in 2013 and we are expecting more and more. The market is very nervous and some key fundamental issues are increasing the volatility like emerging market headaches, riots in emerging markets all around the world, which means political instability and finally the interest rate raise by central banks is peripheries. 
• Second the general fear about the inflation in US and possible interest rate increase by FED in 2014. For this year we need stronger nerves to make money and forget the fascinating easy trading market like was the last year.

The BFM Assets Team.