Vol: Thieving and Blubbering In Full Flight
Since last week both volume and volatility were hot topics, I looked up the origin of the word vol.
What surprised me is that vol is not a prefix with Latin origination, as I would have suspected. Rather, besides its use as a trader’s abbreviation for volume, it is a full word that has variable definitions in several different languages and may be used as a noun, verb and adjective.
In English, Catalan and French it means flight. In French, although the primary definition is flight, the secondary meaning is theft. In Dutch, it means full and in Icelandic it means to whine or blubber. Hence, my title, which means absolutely nothing or absolutely everything, depending upon how many brain cells one wishes to invest in the juxtaposition of those words.
Beginning with the Volatility or Fear Index, we get to use vol for an abbreviation for both volatility and volume as (VXX) or The VIX Short-term had both. The Bullsgot robbed and many hedge funds reported blubbering with the rough week. Fear was in full flight given the most recent usual suspects-Greece and its domino effect and uncertainty over the ongoing Federal Reserve policy. The Volatility index closed above the 50 Daily moving average or in an unconfirmed Recovery phase for the first time since February 2015.
Volume was abnormally large in many instruments. Besides the volume surge in the VIX, notable was the 2-day volume pattern in the Dow as it made new multi-month lows. As it closed above the 200 DMA to end the short week, that volume pattern does create the possibility for a blow off bottom. Of course, by the time the market opens on Monday, Greece’s impact should be clearer which will help make or break the blow off possibilities’ fate.
Same scenario for some other more beat up instruments. Our weakest Economic Modern Family members, Transportation with its runner up sibling, Semiconductors are perfect examples.
Last Wednesday, Trannies made a new 2015 low on more than double the average daily volume. Last Thursday, it closed with an inside day (the trading range was within the trading range from the day prior). This is a classic textbook setup for a bottom. That, and the return to a significant point of support on a monthly chart-a point it has not seen tested since late 2012.
Semis had 3 days in a row of higher than average volume, all of which occurred on the way down to the 200 DMA. That means a possible blow off bottom AND on a very popular moving average-the 200, perhaps the most popular one.
Bottom line is in the Year of the Sheep and 2015’s long withstanding trading range, the Economic Modern Family has had a tendency to rotate leadership, typically right when the sentiment of investors turns bearish.
Therefore, before we let the market rob us and send us blubbering into full flight note VOL-both volume and volatility- and watch how each plays out.
S&P 500 (SPY) Holding the 200 DMA which of course it has to continue to do. 209.16 fills a gap and if that clears, good. Otherwise, 205.50 the 200 DMASubscribers: Neutral pivots in all and Negative in IWM
Russell 2000 (IWM) As this went ex-dividend last week, it closed just shy of the 124 support. There is a lot of support all the way down to 120. On the upside, through 125 will be positive
Dow (DIA) 176.70 the 200 DMA support to hold and over 178 much better
Nasdaq (QQQ) Closed just a wee bit over 108. Lots of folks writing about bear flags. I see more the lower end of the 2015 trading range holding at this point
XLF (Financials) Back to an unconfirmed warning phase
KRE (Regional Banks) Broke the 44.00 area support so now see 42.95 next area to hold. Back over 45 a much better scenario
SMH (Semiconductors) 55.50 to clear with a hold of 54.50 important for the next direction
IYT (Transportation) After an inside day, and based on volume patterns this could be bottoming out
IBB (Biotechnology) 361 support and over 375 hard to argue with
XRT (Retail) Broke the 50 DMA on Thursday. 96.00 has underlying support and over 100 this will have new life
IYR (Real Estate) Confirmed a reversal weakly which means over 72.85 to begin the week positive
XHB (US HomeBuilders) 36.09 the moving average support to hold
GLD (Gold Trust) Not bearish here but wouldn’t buy either
GDX (Gold Miners) After getting super oversold at March lows, it closed the week with an inside day
USO (US Oil Fund) Failed 19.00 so now we look for a dip to 18.00
TLT (iShares 20+ Year Treasuries) Acting like there will be a rate raise-we shall see
UUP (Dollar Bull) Looks strong again
EEM (Emerging Markets) Interesting pattern in some emerging markets
PIN (India Portfolio) Closed on the 200 DMA
EWY (South Korea) Subscribers: Like the recent double bottom and the inside day
CORN (Corn) Made our week last week!
BAL (Cotton) Great basing action
Longs: On categories: Gap higher days we go to all categories and choose ones with lowest risk that break the opening range. On weaker days, we look at Category 3, especially if the picks hold S1, previous day lows or a major moving average and have a good risk on the reversal. The difference between Category 1 and 2 is the stock condition-a Condition 1 is strongest stock and more likely to make a parabolic move.
Note: Anything that is on this list is a candidate for a swing trade-(of course market condition is a factor) -use the max risk mentioned along with an opening range stop using fudge factor and time confirms. I suggest you decide on 1 or 2 that have a risk you like and then position size accordingly
***Market Tone: Short-term Positive 0, Intermediate-Term Negative 2, andLong-Term Positive 2. NOTE: Market Tone is updated before the open each day and changes in real time throughout the day.
*All starred picks are from the automated list of picks (which now includes short picks!)
Category 1: (Aloha) Positive Phase, Condition 1, 2 days under the FTPs, Risk to Previous Day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
*DE 2 inside days. Risk more miniswing to around 94.90 and over 97.00 could continue to new highs
Category 2: (Pipeline) Positive Phase, Condition 2-3, 2 days under the FTPs, Risk to Previous day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
*OC Max risk is 40.57. Has to clear pivots first at 41.20 then R1 41.47 and with an inside day ideally should clear 41.87 as well
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy an opening range breakout or candidate for Opening Range Reversal, with Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry: (Opening range reversals are good on anything above S1)
*EW Negative pivots and hasn’t had a ½ hour close over R1 since 6/28. Needs to close over R1 on a 30 minute basis and then risk can be S1 for a swing
*ALK Converging moving averages and an inside day. Risk to 62.59 and needs to clear65.64. Any OR
Category 4: (Rip Tide) Oversold (2 or more days under FTP), Condition 4, Needs to clear R1, Risk previous day low unless noted differently, Target- Day to at least 3 ATRs from entry:
*EXPE 105.26 is the 50 DMA to hold and if it does, like this over 107 the pivots then Thursday’s high which lines up with R1 Swing
Phase Change:
SUNE 28.69 max risk and best looking in solar space. Has to clear 30.26 R1 for a swing
Reversal Trades: (Glass or Brick Wall Bottom or Top):
EQR Clean reversal. 73.43 is the 50 DMA to clear then can risk as a phase change to the lows of that day it clears the moving averages. Any OR
PM Needs to clear 81.60 and hold now around 81.00 Any OR
Shorts: Daytrades Possible OXY CXO
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
*AMP 127.20 risk and under recent lows can see much lower over time. Any OR
FTI Inside day. Risk is 40.50 and broke the 80 monthly first time since 2008. Any OR
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
