* Getting More Volatile?
- Options volatility, as measured by the VIX, has quieted down from
earlier in 2008, as the above chart illustrates. Note, however, that we
have just made a multi-week closing high in VIX after having bottomed
at a level above that in May. The 1300 level in the S&P emini
futures is increasingly looking like formidable resistance.
* Liquidity Drying Up - I see that Rennie Yang, author of the excellent
Market Tells service, observes that 20-day volume in the stock market has made a seven-year low.
"Once
in 2004 and a couple of times in the 70's NYSE volume hit a three-year
low," he observes, "but this is the first time in the last fifty years
we've seen it hit a 5-year+ low. Volume is not just low, it's really
low." Of course, it's not just that volume is low; it's that we are
seeing reduced volume following a bounce from the mid-July lows. If you
think in Market Profile terms, this means that higher prices are
failing to attract participation--not something you'd expect to see if
this were a fresh bull market leg.
* Where is the Retail Trader? - An interesting article in the September 2nd Financial Times
points out that "individual ownership of US stocks has fallen to a
record low, underscoring the increasing importance of institutional
investors in domestic equity markets." At the end of 2006, retail
investors owned 34% of all shares available and 24% of all stock in the
top 1000 companies, compared with 94% of all shares in 1950 and 63% of
stock in 1980. When we examine volume trends in markets, clearly we're
analyzing the behavior of institutions, not Mom and Pop.
* Checking Readership
- I've mentioned on a number of occasions that the readership of this
blog tends to spike during bear market swings and pull back during
bullish moves. Since the summer of 2007, this has formed a rather
accurate timing tool with respect to intermediate-term market tops and
bottoms. The pattern of readership of late has been consistent with
tops, not bottoms, in the market.
* Hmmm...
- Yes, the market looks weak right now, and I wouldn't be surprised to
see us test the July lows before too long. That having been said, I
notice that we're knocking at the door of multi-month highs in retail
stocks (RTH) and that we're posting multi-week highs in housing stocks
($HGX). Not exactly what you'd expect if all were going to hell in a
handbasket...a lot of issues might be setting up for non-confirmations
of any test of lows.
* Inflation Themes Deflating?
- Commodities, as measured by DBC, have moved from the 46 area to the
36 area since July; 10-year Treasury yields are at multi-week lows. Not
exactly what you'd expect to be seeing if inflation were continuing to
heat up.
* Who'd Have Thunk It? - Talk about sector rotation! I just posted to Twitter:
0% of S&P 500 energy stocks are trading above their 50-day moving
averages, but 70% of financial stocks and 73% of consumer discretionary
issues.
* Change in the Winds - Starting tomorrow, TraderFeed will be taking a new direction. Yeah, yeah, I save dessert for last...Stay tuned...
