Thieving and Blubbering In Full Flight

July 5, 2015

Mish's Daily

By Mish Schneider

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 Bulls got 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 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 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 DMA

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