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Stocks Experience the Return of Volatility

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Stocks Experience the Return of Volatility

Stocks extended Thursday’s loses on the open of Friday’s trading as volatility returned to the capital markets. The VIX volatility index jumped nearly 16% this week, pushing up against resistance near the 200-day moving average. Emerging markets are roiling as the Argentinian Peso dropped 11% this week. Earnings continued to post better than expected number with Microsoft leading the charge. Stocks crumbed breaking through support levels with the Dow losing 318 points and the S&P 500 down 38 points.

In the Emerging market space; Argentina’s peso suffered its worst fall since the country’s crisis 12 years ago yesterday, plummeting 11% to an official rate of around 7.9 to the dollar. The black-market rate is about 13. The collapse in the peso came after the central bank appeared to have stopped defending the currency amid a deepening of Argentina’s current economic woes, which include inflation of 25%.

After the bell on Thursday both Microsoft (NASDAQ:MSFT) and Starbucks (NASDAQ:SBUX) released earnings that impressed market participants. Net profit rose 3% to $6.56 billion, and EPS came in at $0.78, better than the $0.68 expected by analysts. Revenue climbed 14.3% to $24.52 billion. Microsoft sold 7.4 million Xbox consoles, while revenue from the once derided Surface tablet more than doubled on quarter to $893 million Bing revenue up 34 percent and commercial revenue was up 10 percent to $12.67 billion.

Starbucks’ net profit jumped 25% to $540.7 million and earnings per share of $0.71 beat consensus, while revenue climbed 11.6% to $4.24 billion but missed expectations, as did same-store sales growth of 5%. Starbucks raised its FY EPS forecasts.

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The VIX jumped from support levels this week, jumping from support around 12% to 14%. Momentum on the VIX volatility index is positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread.

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