These Two Emotions Control the World’s Economy

By Andy Snyder Editor’s Note: A version of this piece originally ran in Andy Snyder’s free e-letter, Manward Digest. You can go here to automatically subscribe if you haven’t already.

A man needs to know stuff. Oh sure, we can bumble through life being a supposed expert on one thing or another. But to find true fulfillment… we need to know lots of stuff.

We must be curious.

It’s why we cover a lot of topics in these essays. We’ve been called dangerously curious.

Lately we’ve been curious as to what in the world is happening in a peculiar part of the stock market.

Stocks are a realm we know well. We’ve spent well over a decade poking and prodding financial data in order to find the answers we’re looking for. We like to think we know what we’re doing.

But there’s one part of the market that has us scratching our head.

Nonetheless, we’ve already found a way to profit from it (locking in a 110%-plus gain a little more than a week ago). Here’s the deal…

Few folks realize that investing – and especially short-term trading – is this simple. But there are just two deep human emotions that control everything the market does.

Just two.

Fear… and greed.

It’s the balance between those two emotions that moves stocks. When fear outweighs greed… stocks fall. When greed outweighs fear… you betcha, stocks rise.

Right now, though, we’re seeing something we’ve never seen before.

Fear is virtually nonexistent. It’s crazy… a crazy good opportunity.

Like I said, it’s leading to strong profit potential.
An Emotional High
Most traders rely on something we call the “fear index” to measure the market’s overall mood.

It’s the CBOE Volatility Index – or VIX. And it measures fear by tracking a simple statistic called implied volatility.

In the roughest of terms, the index measures how much investors are willing to pay to buy options on the benchmark S&P 500. Because options are a key tool we use to protect our investments from wild swings, we can get a good sense of the overall mood of the market by simply measuring their prices.

Right now… the VIX is near all-time lows.

It means investors are greedy.

Fear, for some odd reason, is crazy low.

Despite a wicked political environment, a tired bull market, the drums of war in Asia and a whole host of other issues… investors aren’t bending over backward to protect their portfolios.

But here’s the thing… the VIX rarely stays this low.

Just a few weeks ago, I wrote to Manward Trader subscribers and told them about this situation – and a trade to take advantage of it. When I did, the fear index was sitting at a level almost identical to where it is this morning.

But within a week… thanks to a bevy of negative political headlines, it shot up more than 50%.

We locked in quick gains of 110% (some investors made much more) on the trade.

I’m convinced it will happen again.

And when it does, investors positioned to take advantage of the move will make strong gains.

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Trading the VIX
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Source:: Investment You

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