What a difference a day makes on Volume…

Yesterday’s volume was the lowest non-holiday related volume so far this year. Although we keep pushing above the 1130 level on the S&P we still haven’t been able to break out with strength, The  financials XLF  are keeping the lid on the market, while the Tech stock performed we.

Today technology was weak from the start of the day, lead by TXN INTC and STX, as well as commodities that started the day weak on the back of Asian concerns for growth prospects, AKS AA.

Today’s volume was much higher for the SPY due to the volatility increase we got after the 2.15pm FOMC announcement. The announcement resulted in shorts having to cover positions, since we traded above the pre-2.15pm levels for the rest of the day – yet we stayed below yesterday’s close, leaving us within a tight trading range.

For tomorrow we continue to have a similar trading range in the SPY 113 area is resistance and 111 is the support levels, as for volume we did good today because of the FOMC meeting, but I’m not so sure we will get the volume tomorrow since we are in August after all.

Earnings Season has started

Light volume up day at the start of the earnings season (SPY didn’t  even trade 150mm shares).Technically plenty of stocks are starting to test the next level of resistance, either the 50day or the 200 day MA — most of which are still sloping down. Could the failed Head and Shoulder be the bottom for now of these markets? that is what we are testing out for the next few weeks, earnings will play a big part in answering that question. For the most part analysts and companies have lowered expectations for the 2Q, as can be seen by the beat in AA and CSX last night. My expectation is that companies might beat 2Q earnings expectations but will remain caution about the 3Q – seems like the right thing to do with the unemployment levels still very high – any upbeat 3Q guidance will be taken as a positive surprise by the markets..

Portugal was downgraded this morning, yet the impact doesn’t seem to be as negative as other downgrades, for one S&P kept a stable outlook for the next 12months. Also Greece was able to issue some 6month bonds at below the 5% level, a decent reentry into the funding markets.

Recent upgrades for the semiconductors is helping the Nasdaq gain some relative strength ($BRCM breaking out nicely), what we need now are the financials to start kicking in some positive sentiments – $JPM, $BAC and $C all report later this week. These two sectors will be the focus of my attention today ($SMH and $XLF).

Equity markets getting direction from US$

As equity traders, we normally don’t need to be extremely aware of the US $ and it’s relationship with other currency; however, for the last couple of weeks we have seen an increase in the correlation between the $ and the equity markets. A great part of this is the result of the strength and weight of the commodity stocks, which have always had a correlation with the currency markets.

This morning’s large move up in the markets was caused by the sudden weakness in the US$, when the US$ started to strengthen during the late morning, we saw the markets start coming off its highs. We also saw once again a sell divergence develop intra day today as only the Dow Jones made a 52week high.

As intraday traders you need to be aware of what factors/sectors/or markets are moving stocks, so you can be ready and anticipate the next move.

Now that we are done with the earning season, maybe the macro economic numbers will be the only indicators that move this equity market one way or another.

Where is the Volume?

The only part missing from the market making new highs is the fact that we don’t seem to have real volume behind the volume. If you look at the SPY over the course of the last few months, you can see that the markets have gone down on higher volume (a usual sign of distribution) vs. day that the markets are up (for instance the SPY traded 142mm shares, vs. the avg volume in the last few months of almost 200mm shares). Granted the fact that only the Dow Jones has made a 52 week high today may be the reason for the lower volume in the SPY and NASDAQ; tomorrow we need to see all three markets take out the 52 week highs, ideally on higher volume, other wise we may start to see the classic set up for a sell divergence in the markets.

 

 

The one sector that lead the way higher in September, the financials, they need to start performing better for this rally to stick. Earning seasons is coming to an end, so plenty of number crunching has taken place with the analysts; the only sector left to report is the retail sector. For the most part analysts have not lowered their expectations going forward… so the only variable still missing from this rally is the volume… I’ll be looking for that tomorrow and the rest of the week.

2nd week of 2009!

Second week of trading for 2009! Here we go… everybody has been ready to go setting goals for trading, and making sure they start the year off on a good note. The best place to start is making sure your goals and your plan are compatible with each other. Then you have to make sure you stick to your plan. At Keystone, we have been pounding the table with traders, and ourselves, to make sure we are ready and prepared for this year.

As for the markets, we are still carrying plenty of issues from last year. The financial sector continues to be in the limelight with TARP II coming into the discussions before the start of the Obama inauguration, congress is trying to get it to vote by this Friday. That will also be options expirations ahead of a long weekend, since Monday is a day off. If the congress is able to pass the TARP II, it will be interesting to see the restrictions that are imposed to financial institutions, and how the stocks will react to them. It will also be interesting to see what if any restrictions are placed on where this money can be used, remember that TARP I was spend fast and without any real plan.

Nonetheless, with all the uncertainty still left, the VIX index has come down as leverage has come down in the equity markets. Cash positions are relatively high, historically, so for now we do have lots of investors on the sideline. This bodes well for intra day traders, since order flow becomes easier to read and follow.

The year started better, with clearer order flow… Let’s keep our New Year’s resolution and stick to the plan and our goals will follow suit.

All the best for 2009!

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