ASYMMETRY® Observations are Mike Shell’s observations of all things asymmetry, asymmetric risk/reward, asymmetric payoffs, and asymmetric investment returns.
We actively monitor several investor sentiment gauges that indicate how optimistic or pessimistic investors are about the stock market. One of the sentiment indicators we monitor is the Citigroup Panic/Euphoria Model. When it reaches an extreme, I comment on it here.
The Cboe Implied VIX Index is a measure of expected future "implied" volatility. The Cboe® Realized Volatility Index is designed to indicate the magnitude of actual realized daily price movements by measuring the annualized standard deviation in the daily price return of an underlying over a specific period.
A position with asymmetric risk/reward is one in which the possible profit is larger than the potential loss, or the size of the expected gain is greater than the magnitude of the loss.
I pointed out in Downtrend but Statistically Oversold Short-Term as Gold Turns Up the US Dollar had reached a statistically oversold level, setting up a high probability for a countrend.
According to Citi, the panic/euphoria model is a gauge of investor sentiment. It identifies "Panic" and "Euphoria" levels which are statistically driven buy and sell signals for the broader market.
Sector trends offer dispersion: over the last 10 years, the average difference between the best-performing and worst-performing sectors has been 45% per year.
The FOMC raised rates by 25 basis points but gave no indication of its intentions for the September meeting. Powell stated that the FOMC has not decided to hike rates every other meeting and will instead take it meeting by meeting.
S&P GSCI® Goldman Sachs Commodity Index is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures broadly diversified across the spectrum of commodities.
While most investment managers using fundamental earnings growth and valuation like this for decision making. we primarily focus on the price trend direction, relative strength, momentum, and volatility to determine when to buy or sell, but we still monitor these fundamental metrics.
The MOVE index (Merrill Lynch Options Volatility Estimate) is a market-implied measure of bond volatility similar to the CBOE Volatility Index ($VIX) for stocks. Some consider it fear in the bond market, as in uncertainty about interest rates.