Tips for traders, 23 June 2020
Recent upticks of COVID-19 patients in some regions like Europe and some new cases in China have increased the worry of investors. A second wave could mean a second lockdown. ٌesearchers are racing against the clock to find a vaccine as the speed of mutation has become an obstacle.
Fear has made money flow out of some risky assets and back to safety. This means the current situation might not be as good as what most people had thought. However, it seems that the outflow from risky assets has not been as aggressive as what happened in March.
We can see that the VIX recently went up from 24 to the 30s, so the fear of traders of and investors in the S&P 500 is increasing. The VIX hasn’t reached its previous level in March, but the possibility to reach it in the future is open.
Short-term trades are still in focus for now because the environment is not conducive to long-term trading. Exposure to risk remains high as fear accumulates as well. This is likely to mean volatility: higher volatility generally means more chances to trade on smaller timeframes, other things being equal.