VIX Plunges To A 4-Month Low: 5 Top-Ranked Momentum Picks
Zacks Investment Research | May 10, 2018 09:12PM ET
Is volatility in the U.S. stock decreasing? The CBOE VIX — which reflects S&P 500 option bets to calculate expectations for volatility over the coming 30 days — is currently below its five-year historical average. Moreover, the index declined more than 55% in the last three months.
Since stock market performance and volatility index move in opposite directions, this is an extremely positive sign for the U.S. stocks. This situation is likely to uplift investors’ confidence significantly. Considering these positives, momentum stocks with favorable Zacks Rank are lucrative investment options.
CBOE VIX Drops Below Psychological Barrier
On May 10, VIX closed at 13.23, touching its lowest since Jan 26 and also below its 200-day moving average for the first time since Jan 12. The 200-day moving average is popularly regarded as a longer-term level of support for the stock market momentum. The volatility index is also below its 50- and 100-day moving averages indicating short-term support level.
The VIX reached a 29-month high of 37.32 in Feb 5, doubling itself in a single session, which resulted in a 10% correction for major stock indexes. Consequently, market volatility persists with big swings in both directions on an almost daily-basis.
It took four months for the Wall Street’s fear index to breach the 200-day moving average floor. Such a long spell was last recorded since early 2016 when China decided to devalue its currency. VIX is below its psychological barrier means that the index is likely drop more in near future. All these reflect significant upside for the equities.
Robust Earnings Momentum
First-quarter earnings results have been exhibiting strong momentum so far. In fact, investors have pinned high hopes on first-quarter 2018 earnings. Total Q1 earnings for the 444 S&P 500 companies that have reported so far are up 24.5% from the same period last year on 9.3% higher revenues.
Considering first-quarter as a whole, total earnings are expected to be up 23.6% from the same period last year on 8.8% higher revenues, the highest quarterly earnings growth pace in seven years. For full-year 2018, total earnings for the S&P 500 index are expected to be up 19.2% on 5.7% higher revenues. (Read more: Zacks Investment Research
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