I start immediately with a question about a fundamental tool to invest: why is it important and what is the Move indicator?
Move is the indicator of volatility in the bond market that was bought in 2019 by Bank Of America, some of you will know the Vix twin that is considered the fear indicator par excellence in the options market.
It is important to note some peculiarities such as if the Vix index falls and the Move indicator rises, a shift from bond asset classes to equity asset classes is underway.
The word Move indicator means Merrill Lybch Option Volatility Exchange and as I said earlier measures the volatility of options traded on US Treasuries for the 2.5.10 and 30 year periods of 1-month options prices.
Why is it important?
Move indicator identifies sentiment and can give investors signs of mood change in financial markets.
It can be used in intermarket analysis because statistically (in the past more) it has an inverse correlation to the performance of us markets, if the Move indicator rises its cousin S&P 500 drops and vice versa.
(Never trust correlations because markets like lately have been drugged by Central Banks and unfortunately have destabilized the nature of finance with the real economy.)
It’s important for me to see how long before it moves compared to the S&P 500 because there’s a chance that something will change in the stock market and my strategy is to “try” to improve it before events happen so my focus is the world’s toughest options market.
I forgot that it was developed by Merrill Lynch, institutional investors use it as a technical analysis tool, the Move moves between 60 and 120 on average, above the 120 indicated high risk highs while below 60 indicates overconfidence in the market.
I would like to point out that the Move indicator at 60/70 is not a positive sign because it is a warning that something in the financial markets has an anomaly. Vix witnessed violent accelerations from 20 to 36 points in a short time, as investors in low indicator options point out that “securing” from risk is convenient in price.
I recommend operationally talking about monitoring Vix and Move because we have an overview of market sentiment also you can do the Move/Vix ratio to know where the money is going if from one asset class or another asset, high values indicate that institutional operators favor equity while low values the bond market.