VOLATILITY IS A DOUBLE-EDGED SWORD

Thursday everything was about the ECB’s new 60 billion euro new large-scale bond purchasing program and previously the announcement the Dow was falling 71 points and later was jumping 286 points and finally rose 1,5%. The index rallied in four consecutive days. The index’s volatility was extreme again yesterday. So far, the DJIA has seen a trading range of 200 points or more every day in 2015. We have to live with that as a new pattern.

The volatility is a healthy thing for the markets. Some days are lower and for some periods are bigger. Most of the investors are freaked out by the volatility and they usually lose money, they see only the risk of this pattern. The volatile market doesn’t come from the devil. The volatility on the other hand is a great opportunity to make money because the volatility creates more buying options and create great bargain hunting deals.

We are expecting more roller-coaster moves in US indices further in the following weeks, this might be staying with us till the FED starts to increase the interest rate, which could be possibly this spring. All in all, the market is in a very-very bullish momentum, yesterday the S&P 500 closed its highest level in 2015 and the European indices are at their historical records or close to them. So, our advice is to buy the dips with small portion of positions, that is the only working method in this kind of volatile market conditions.

Here is the trading range of Dow yesterday (17.480-17.840)

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The BFM Assets Team.