Weekend Review 07/13/12

There's an expression, “It looks good on paper.” I use this when I look at 1.43% index moves that lack volume and buyers. But this is just one day of many and the larger pattern forming is that of a series of higher lows which is constructive. The longer this pivot holds, the more it affirms the uptrend and confirms that a bottom has been set in place in June. In the least it's safe to say that the market is currently range bound as it's been well over a month since a new lower low was established.

What I continue to pay attention to is volatility as I've chosen to define it by the number of overnight 1% moves and the number of intraday 2% moves. The previous one before Friday's was 9 sessions ago. These moves are illustrated at the top of the chart and a clear pattern emerges during periods of sustained up moves and that's a lacking in these types of days. In smooth up trends the market is much more orderly and efficient as higher prices are continually supported.

I've also been keeping tabs on the historical volatility of the market which this week dipped below .50 for the first time since April. I've noted that during times of sustained up trends this tends to stay below .50 for prolonged periods and as volatility increases it undulates above and below and of course spikes during violent down moves. This is much in keeping with market internals as up trends tend to be slow and methodical, ranges can be sleepy quiet or chop and slop, and down moves tend to begin with a bang.

SPX 07/13/12

Additionally the Primary that I follow flipped again, so this continued vacillating of this indicator is like being at an intersection with a foot on the gas and a food on the break as the light blinking from red to green. I make it a point to trade more often and more aggressively when it's flashing a solid green but that hasn't been the case.

Primary

Part of the reason for this indecision is that there hasn't been a pattern of aggressive buying or capitulation selling. Every time there looks to be buyers coming into the market, after a few days the selling hits in a drip by drip fashion. Clearly the money I want to be following aren't taking positions and stampeding over each other to get in on price as of yet, so I'll continue to look for the signs that they are.