Why Relative Volume Matters for Your Trading
12 hours ago
“The Vix is the lowest we’ve seen since before the financial crisis,” said Warren of the CBOE Volatility Index /quotes/comstock/20m!i:vix (VIX 16.47, +1.02, +6.60%) , which on Wednesday fell 6.3% to 15.45, its lowest close since July 2007."OK, well let's look at the VIX. Here's a chart of the VIX, in monthly candles (since Mr. Warren is taking the long view) going all the way back to 2006, before the housing bubble really took off. In the 2005-2006 area, the VIX was averaging below 12, and actually hit a low of 9.39 in December of 2006. Compare that to today's 16 and a half and I'd say that the alarm bells are a bit premature (as they generally are). Remember back in those days when people were saying the VIX was "broken", that it no longer worked and that some new indicator was needed? I'll believe a market correction is imminent when I start hearing that sort of talk again. Until then, I think the VIX still has room to fall further and stocks have room to run higher. Today, the VIX is only low if you compare it to the crazy levels it reached back in 2008. The VIX at 90??? Now that was the buy signal of all time.
"My general feeling is that we may be in for several days of consolidation"and that's just what we got today, ending barely down just a couple of points in the Dow. Unfortunately, the candle it produced was a gravestone doji which is a bearish indicator. It also marks a failed attempt to breach the 11,440 resistance level. The market is going to need a few more days to regroup for another attempt.
I'm getting a feeling that we might be in for a bit of a pullback tomorrow.and that's exactly what we got, with a 20 point loss in the Dow. I ended up not taking any short positions though. In fact, I made no trades today, and judging by the low volume, a lot of other folks stayed home too. So where next?
"Germans are not going to retire at 67 so Greeks can retire at 58."
- Angela Merkel, Chancellor of Germany
1929 - US President Herbert Hoover announces to the U.S. Congress that the worst effects of the recent stock market crash are behind the nation and the American people have regained faith in the economy.Performance
It looks to me like we're in for some continued weakness for at least a few more days, possibly a week.and sure enough, the Dow ended down 39.5 today. But look at how that played out. I also said we'd get more clarity after today's action and so we did. Today, I'm a bit more optimistic because there are two telling points in this chart. First is the shape of the candle. This is as classic a hammer as I've seen and that's always bullish. If you consider the range-bound sideways channeling action of the last 10 sessions now as lumped together into a consolidation, then we have a potential resolution here and may see some upside later on this week.