Where To Wolf Obtains, There The Wolf Eats

---

Estonian Proverb

Looking at the daily average volume in the indices over the course of last week, it seems pretty safe to say that although there always will be pockets of specific sectors and/or instruments that defy the norm, overall, 2014, which began resembling the Chinese Zodiac animal spirit of the horse, galloping up to new highs, will conclude evoking the 2015 animal spirit of the sheep, quietly grazing on the hill.

Take last Friday. The volume in all the indices was halved or more than half of the daily average volume. Yet, in gold (GLD), Silver (SLV) and several other mining ETFs, the volume nearly doubled their daily average.

Moreover, the S&P 500, the Dow, and NASDAQ all had inside days (when the trading range of the day is inside the range of the day prior.) I find the low volume and inside day formations in these indices near or at 2014 highs positive. The Russell 2000, on the other hand, did not have an inside day, could not clear beyond what I considered an important area to end the week above (117.37), yet with the low volume did hold onto support at 116.50.

Equities such as Baker Hughes on the news about Halliburton and a possible business collaboration, Blackberry Ltd, had huge volume spikes-BHI traded up over 2%, BBRY down over 6% and Hertz HTZ, another one with mammoth volume, also traded down 5%. One might say that on a hillside of sheep, those 3 equities along with the metals were the wolves in sheep’s clothing.

Biotechnology ended the week the big loser with Biogen (BIIB) down over 3.8%. In last Thursday daily I wrote for Friday to “short a tired sector short-term such as Biotechnology.” In stark contrast and other than the metals glittering performance, Amazon and Tesla both had net percentage gains of 3.7 and 2.5% respectively.

Although rare for me to report on specific stock and ETF performances within the commentary part of this blog, I do so now because if you are an active investor looking to play til the end of year, finding the aberrant volume and price patterns will probably serve as your best compass.

It never troubles the wolf how many the sheep may be. Virgil

S&P 500 (SPY) Inside day near the highs. What could be so terrible? One note of caution is the Market Internals: Advanced/Decline, which has turned negative along with the McClellan Oscillator, and Up/Down Volume Ratio.

Russell 2000 (IWM) Held 116.50, which if breaks remains worrisome, 116.75 is pivotal, then 117.14 then 117.80

Dow (DIA) Inside day near the highs

Nasdaq (QQQ) New highs close with an inside day

XLF (Financials) 24.10 has to clear again. Otherwise, a break of 24.00 troublesome

KRE (Regional Banks) If 40.34 holds then will consider the end of last week a good correction

SMH (Semiconductors) Strong end to the week and now has to take out the last 3 weeks of consolidation to continue

IYT (Transportation) Lackluster but strong

IBB (Biotechnology) From last Friday’s Daily, “short a tired sector short-term such as Biotechnology.” Now, 280 big underlying support.

XRT (Retail) Inside day IYR (Real Estate) Broke the 75.00 support and could have more downside

ITB (US Home Construction) Hovering at recent highs for 3 days in a row

GLD (Gold Trust) Explosive bullish engulfing pattern which might need a little digestion

USO (US Oil Fund) From last Friday’s Daily, “WHAT DO WE WANT? OIL! WHEN DO WE WANT IT? NOW!” 2-day brick wall bottom if confirms

OIH (Oil Services) Inside day

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 120 pivotal area and the 50 DMA to hold 117.95

UUP (Dollar Bull) Ugly possible reversal-has to confirm