Will Volatility Fatigue Set into the Stock Market

BY ANDREW GIOVINAZZI

March 14, 2025

Yo Pit Crazies,

I know for sure what kind of fatigue is setting in. That is logging into my equity accounts and watching a bunch of my stocks go down for the year. That is rough sledding sometimes and for every happy Palantir Tech Inc (Ticker: PLTR) sale over $100. I can think of a Tesla Inc (Ticker: TSLA) or Block Inc (Ticker: XYZ) that I did not sell are down 50% or more from the highs of just December. Don’t even start me on the VIX puts I have for the March cycle.

Ultimately there is allocation. It is not great my stocks are down but I will survive because I allocate. In the trading account I don’t like more than 2% of real risk per option trade. So on
$5000 that is $100 per trade. That is my standard Two Way Trade Allocation. If I lose more than that I did a bad job managing my trade. It happens, I just do not want to make it a habit.

What we have is a selloff on a lot of known unknowns. We have tariff wars because the White House wants a fair playing field. We need lower rates because we have a mountain of debt to roll. We need to cut the budget by 1.5 Trillion Dollars a year. Some stocks were trading at crazy nosebleed levels, most notably the Mag 7 and stocks like Reddit Inc (Ticker: RDDT), Microstrategy Inc (Ticker: MSTR) and PLTR to name a few. These we know now and knew in early Feb when stocks were making highs.

What we did not know was how we would get to the end point. Listen to any earnings conference call, like Adobe Inc (Ticker: Ticker: ADBE), and the management had not a lot good to say about the outlook. Stock down $50 or over 10%. XYZ turned in a great number but said the outlook was cloudy, that got the stock going from the $80s to $55 which I think is a bargain. That does not mean it cannot go to $40 in this environment. Remember to nibble.

That is all about sentiment and where the sentiment from Nov 5th to mid- Feb was strong it is leaking like air out of a tire with a nail in it. Then the nail just plum blew out. Now there is no way to plug the leak. For right now. Sentiment is what gives folks confidence to invest. When that is gone they take their cash and sit on it.

SPY 3 MONTH Chart

Let’s see if there are some green shoots where this selloff is coming to an end.

The Purchasers Price Index (PPI) number came in cold like an ice cube

Now if I am checking off the list, these numbers helped. Lower inflation rates make lower interest rates possible. Check 1. As the CEO’s on the conference calls said, it is looking murky out there. The MSM helps the narrative because they play up tariffs and down play lower PPI numbers. That makes the sentiment for stock buyers terrible.

A new low in the SPY for the year is still a new low in SPY for the year. As much as I would like to see a nice bounce to 570 SPY, especially for some Weekly Profits Cycles positions, without the Fed helping next week I don’t see how that will happen but at a 24 VIX it only takes a couple of days.

SPY 1 month chart with 1 day candles

That also means the selling will likely slow down waiting for the Fed Day on March 19th which might very well be the bottom if the daily ranges keep contracting. Note on the chart above that the ranges have stayed about the same which means the selloff does not have the ferocity of last week.

I will be looking at a VIX contraction trade in April and the FOMC meeting should start some certainty again if they see the picture of inflation pressures is easing. At least a bit more information on what the market is dealing with.

To Your Trading Success,