Anatomy of the Volatility of Market Corrections 2013 YTD

Looking back at previous Market corrections over the past year, there were several. We know that past performance is no guarantee of the future, but was there any similarity?

On Monday, February 25, the second largest correction rose out of a rising week of uncertainty that started February 20 with a large 25% volatility rise over that day. Can you recall the news that day? Greece?

March 18 and 19 was a 2 day Monday Tuesday 25% VIX Future correction.

April 15 was the largest Monday correction, but unlike Feb 25, the Weekly aftermath rose an additional 5% to peak on the Thursday 18th after a 15% fall Tuesday.

Monday May 20 was the start of a long trend of rising volatility for an entire month until Monday June 24.

Then a rising trend started again from August 14 to Aug 30 when they expected Tapering bond covering and mortgages to start in September.

The next started on September 16 and lasted to October 9 for a 44% rise.

Then it went to a low on November 15 that peaked December 17.

It seems like these things were generally following the Monthly Fed Decisions, and uncertainty over the Taper Policy which has come and gone, or has it? Markets do not like uncertainty. They do like clarity. I would think it was clear that the Fed said it will do whatever is appropriate to nurture the recovery as it progresses or does not.

Well I hope that is all clear. Anybody want to guess or have a crystal ball? It remains to be seen what happens after the current correction with several important news releases pending. The SPX has dropped about 4% so far from an all time high of 1850.84. After hours though, ES futures dropped 10 more points to around 1780.25 from a high of 1846.50. It was about a 3.6% correction back from the high. The futures have corrected about 5% in the past, but never all at once. Comparable 2 day corrections would be like June 19 and 20 with a pause on the 21 followed by another drop after the weekend.

During all these corrections there were intermittent minor rallies, possibly due to short covering. That happens when short sellers betting on the downward movement cover their bet. They do not like to hold short positions over the weekend apparently according to Art Cashin of UBS at the NYSE. Here is a video showing what another forecaster thinks may happen.

And now it is another week, starting down after a pre open high. The bears have come out of hibernation, but who knows when and if they will tire? We will see...