Friday, September 5, 2014

Increasing Intraday Volatility

Yesterday probably surprised a lot of traders.  After having a gap up open and selling off right from the opening bell for Tuesday and Wednesday, yesterday, we had a gap up and there was some follow through buying, but it didn't last long.  While Europe was roaring higher, after Draghi's QE musings, the S&P reluctantly went higher, but the air is quite thin up above 2000, and we sold off viciously intraday, something we haven't seen too much of.

And now for what I haven't seen in what seems like ages, a big gap down heading into the NFP report, on no news.

After the past 3 days of price action, it is becoming more apparent that equity buyers are not eager to pay up at these levels.  We may have to consolidate for a few days and have a little pullback to scare out the skittish bulls, before we grind higher again.  I will not play short to try to catch the pullback.  Instead, I will be waiting with baseball glove in hand waiting to scoop up stocks on the dip.

This is a benign environment, now that Draghi is bringing out the bazookas and the Fed ignores the strengthening economy and refuses to speed up the rate hike schedule.  After 5 years of upward price action, it looks like we have the recipe for a full blown bubble.

Short term, we are looking shaky, due for maybe a 2% pullback soon.  Buy it.


Anonymous said...

Do you have any spx target for the pullback? look around people are talking about 1800 or even 1700..I am thinking it maybe 197x..

Anonymous said...

What do you think of buying Europe equities index? Given how US and JP equities had reacted to QE. Thx.

Market Owl said...

I don't like buying Europe. Always prefer US over Europe. US has much better demographics and long term growth potential. Plus stock buybacks. Europe QE will be nothing compared to what Japan is doing.

Market Owl said...

Target for SPX pullback is around 1970 to 1975. About 1% down from here.

Anonymous said...

I understand you trade for short term trend. But do you have suggestion of how to target for longer trend, say 3-6 months? Or market visibility nowadays has never been that long? Thx.

Market Owl said...

If you want to target a longer trend, it is essential to understand the fundamentals of the market that you are trading. I believe the long term fundamentals for bonds are very strong, and the long term fundamentals for stocks as being weak.

Short term trading is less about fundamentals and more about investor positioning, sentiment, and short term money flows.