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The Market Never Drops…Why Hedge?

  • Written by Syndicated Publisher 413 Comments413 Comments Comments
    February 13, 2012

    Overall volume on the major exchanges has been low, and that’s especially true among many of the exchange-traded funds that profit on a market decline.

    The S&P 500 went the entire month of January without a meaningful drop, so traders are not seeing much point in hedging against seeing one anytime soon.

    The chart below shows the volume in inverse ETFs.  We can see that the other times this hedging volume was so low, stocks got hit soon afterward.  Even if we compare this volume against total composite NYSE volume, it’s almost exactly the same picture.

    Images: Flickr (licence attribution)

    About The Author

    Sundial Capital Research, Inc. is a company dedicated to the research and practical application of mass psychology to the financial markets.  Sundial publishes the sentimenTrader.com website.

    The work of Sundial Capital Research has been mentioned in publications such as Barron’s, CNN, CNBC, SFO Magazine, The Economist, Reuters, The Wall Street Journal, Active Trader, Futures, TheStreet.com, TradingMarkets, and many others.

    Sundial Capital Research founder Jason Goepfert won the 2004 Charles Dow Award for excellence in technical analysis from the Market Technicians Association.  SentimenTrader.com won the award for Most Useful Website for Traders in 2008 from SpikeTrade.com.
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