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Volatility is on the Move

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Volatility is on the Move

Implied volatility has measured by the VIX volatility index continued to climb on Monday, following Friday’s moved higher and push above the 200-day moving average. High flyers such as the bio-techs which were the market leaders during the past 6-months have seen significant profit taking, just as US yields have started to climb higher.

There has been no attempt as of Monday by Fed governors to alter the language used by Fed Chair Janet Yellen and guide the market away from the implication of Yellen’s definition of a considerable period which see mentioned could be 6-months from the end of bond purchases. Interest rates have moved higher pushing the 10-year yield back toward the 2.77% level, but still well below the 3% level that has historically frightened market participants.

The comments Yellen made during her pressure conference puts the first rate hike in the second quarter of 2015. Interestingly this seems to be a hot button issues as the Fed is geared to greater guidance, but does not want a specific period for future rate highs. Investors may be particularly sensitive to Fed officials comments on these issues in the days ahead.

The lower end of the VIX range seems to have moved higher with a floor over the past two months near 13.5% compared to the floor levels seen during the period of October the January 2014 near 11.8%. The VIX spiked in February as the equity markets tumbled to 21.5%, and could easily experience moves that are higher than this level when geopolitical events take hold. The current strife in Ukraine could easily be one of those instances, which push volatility to new highs for 2014.

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