There is a similarity between our strategic model performance currently and that of the same period in July - August 2011. In 2011, the SP500 had started out at 1253, ran up to 1373 in the first week of May only to fall over 21% to 1077 into the first week of August. While the volatility is not nearly as dramatic as 2011, strategic model performances can pick up patterns in price discovery where chart patterns look comparatively different.
The pick up in recent volatility may have to do with the potential significant impact anticipated from the Jackson Hole conference stating August, 21.
Back in 2011, the market had rolled over and was gaining downside momentum. Bernanke's speech from the conference then was the hand tipping in front of the Fed's September move in what would come to be known as Operation Twist. And while the markets initially reacted negatively to OT, new lows (1068), that low became the foundation of the current rally.
Yellen is facing a different market with much higher price levels in the SP500, yet she has used much of the same dovish analytics as Bernanke did back in 2011. Rates at that time had just fallen to around 2% in the 10 year so the game of choice in yield then as now favored equities.
Look for volatility to pick up with swings from one end of the range to the other beyond Yellen's speech. Direction will come in October.
