eResearch Corporation 78 Cameron Crescent, Suite 202 Toronto, Ontario M4G 2A3

www.eresearch.ca

Volatility

eResearch Corporation is pleased to provide an article by Larry Levin, whose Trading Advantage is a

leading investment education firm that empowers traders to achieve and surpass their financial goals.

More than 50,000 students have used Larry Levin's proven techniques for powerful results.

Daily Newsletter: Starts on the ensuing page, in which he is happy to see volatility and

higher trading volumes return to the markets.

Market Comment: He thinks the financial sector will continue to run.

________________________________________________________________

Larry Levin’s website is known as Trading Advantage: http://www.tradingadvantage.com

Larry Levin trades the S&P 500 at the Chicago Board of Trade, now known as The CME Group, the

world's largest and most diverse financial exchange. He has been trading his own account or companies'

proprietary accounts since 1993. At the height of his trading career, he averaged between 2,500-3,000

S&P contracts per day. Larry Levin appears regularly on CNBC, Bloomberg Television, The Business

News Network, and other major media outlets, providing his expertise and insight on the current market.

His lifelong vision is to teach people how to trade the right way.

A direct link to personal information of Larry Levin, from his website, is as follows:

http://www.tradingadvantage.com/larry-levin.html

____________________________________________________________________

eResearch was established in 2000 as Canada's first equity issuer-sponsored research organization. As a

primary source for professional investment research, our Subscribers (subscription is free!!!) benefit by

having written research on a variety of small- and mid-cap, under-covered companies. We also provide

unsponsored research reports on middle and larger-sized companies, using a combination of fundamental

and technical analysis. We complement our corporate research coverage with a diversified selection of

informative, insightful, and thought-provoking research publications from a wide variety of investment

professionals. We provide our professional investment research and analysis directly to our extensive

subscriber network of discerning investors, and electronically through our website: www.eresearch.ca.

Bob Weir, CFA: Director of Research

Note: All of the comments, views, opinions, suggestions, recommendations, etc., contained in this Article, and which

is distributed by eResearch Corporation, are strictly those of the Author and do not necessarily reflect those of

eResearch Corporation.

Third Party Research June 30, 2017

eResearch Corporation www.eresearch.ca 2

Volatility

I have written extensively over the past several weeks about how slow the market has been in every way;

volume, momentum, VIX, etc. All have been in the tank, until recently. The last three days have seen

elevated volume and volatility, which is most appreciated. But this is not that much of a surprise, because I

wrote about the possibility two weeks ago. (a partial portion is below)

A very good “quant” analyst at JPMorgan, Marko Kolanovic, believes Friday and next

week could see higher volatility because of the quadruple witching and especially the

size of the S&P options expirations. His note to clients is below…

In our view, it will be difficult for the market to go much higher from these levels (~2,450) unless there is meaningful progress on US fiscal reform (i.e. tax cut). Current positioning of various investors is already quite high and that poses additional risk going into weak seasonals. Low volatility and positive price momentum resulted in high leverage of systematic investors: CTAs are likely at their ~95th percentile of equity exposure, Volatility targeting funds are likely

eResearch Corporation www.eresearch.ca 3

at maximum equity exposure, and other investors (such as equity long-short and risk parity funds) also have above average equity exposure and leverage. The impact of S&P 500 derivatives has been supporting the market going higher in the first few days of this week (expiry momentum)… …and will turn into a headwind next and the following week (reversion of expiry effect, and reversion due to monthly/quarterly rebalances). $1.3T of S&P 500 options expire on Friday, and this will change dealers’ positioning (half of the long gamma positions will expire). This can result in market volatility starting on Friday and into next week.

So the warning is coming to pass. Over the last few days volume has increased by more than 50% on some

days and the ranges have been extended by more than 100%. Said another way: volatility has increased.

Friday is the end of the month and quarter, so the higher volume should stay intact. Next week, however, will

be another story. The market is only open for half a day on Monday and closed on Tuesday for the July 4th

holiday.

Have great vacations and enjoy the family.

BW: Larry, you should wish Canada a Happy 150th Birthday!

Larry Levin

<For today’s Market Comment, see the following page>

eResearch Corporation www.eresearch.ca 4

Market Comment: Volume Trading Is Back

What a wild day of volatility and volume yesterday. The bears were at it again and they kept piling on

once the momentum got going.

The markets were down huge at one point, especially with the Nasdaq giving all of its previous day’s

gains away. Gave it away and then some, I should say. Tech stocks have been volatile lately, but it is clear

when the markets have been moving lower it has been because of Tech.

Look at the financials short term for strength. The stocks in this sector had a strong upside response

yesterday even in the face of selling. The big money could be looking to park their money there for the

short-term. Some names to watch short term would be BAC, C, and JPM for now. However, the entire

sector should continue to lift in the short-term.

Holiday weekend ahead with just one day to go. It could be an active morning and completely dead

afternoon today.

###

Larry Levin's Trading Advantage is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results. Larry Levin larrylevin@tradingadvantage.com Trading Advantage (888) 755-3846