Chaos-craving traders leap into action as Nasdaq swings double

The whipped up volatility that is pushing Nasdaq futures up and down at twice last year’s rate is making for queasiness among the buy-and-hold set. But it’s the kind of market a lot of traders have been waiting on for a while.

The whipped up volatility that is pushing Nasdaq futures up and down at twice last year’s rate is making for queasiness among the buy-and-hold set. But it’s the kind of market a lot of traders have been waiting on for a while.

Among them is anyone who still has the guts to make bearish bets on the market, a class of speculator that has struggled mightily amid years of mind-numbing gains. While up weeks like this are still testing their resolve, measures of such positioning are rising at the fastest rate in four years. Other categories, including various types of systematic funds, have snapped into action as the market’s chaos quotient rose.

While an incursion by traders hoping stocks will fall or twist wildly sits uneasily with many investors, in many ways it’s a sign of health -- or at least normalcy -- in a market where uncertainty around monetary policy is opening a new chapter for speculators. Volume shows they’re diving in -- a 10-day average of the value of all stocks traded in the U.S. stands at US$820 billion, 46 per cent above 2021’s average.

Gone are the days where a dovish Federal Reserve kept everything predictable. Now, investors who want to make judgments between winners and losers have something to get excited about, with earnings from Amazon.com Inc. and Facebook parent Meta Platforms Inc. sparking two of the largest daily changes of share values in American history. (They were in opposite directions.) 

“There are players out there who view this heightened volatility as something a bit more sinister and as a sign that maybe we’re going to see the indexes play more catch-down to what frankly has been a lot of underlying weakness in the market,” said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. “If you’re more trading-orientated, you don’t like a perpetually low volatility period. You want higher volatility. That’s where the opportunities come.”