Thursday, November 1, 2012

One Day Wonder

Traders have moved on past bad earnings, on to something perhaps worse.  The fiscal cliff.  The elections next week will be a nonevent unless somehow Romney wins, which will be a short squeezer.  In any case, the fiscal cliff will be the big worry after the elections and should create a volatile market. 

This year has been the least volatile since 2006.  It has sucked the life out of ES trading.  My theory about volatility is as follows:  markets are the most volatile around bottoms.  Markets are the least volatile in the stage leading up to the formation of a top, not at the top.  When forming a top and ending a bull market, the volatility rises before the downtrend.  Just based on the low volatility of this year, this bull market probably has another 6 months to 1 year left in it. 

We haven't had a rally in ages it seems.  We finally got one today.  The rally should not last for long and is a sell opportunity.  I expect weakness tomorrow.

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