Today’s market action was not a bad day of consolidation for the overall market itself. However, we continue to see earnings disasters like PCLN and fear continuing to flee the market. Volume on the NASDAQ was above average, but below Tuesday’s session level. All in all, the NASDAQ put in an inside day on lower volume. This is precisely what you want to see the market react during an uptrend. However, how far can this market lift when you have the “fear” index sitting at just 15? There is a lack of fear in the market as sellers have completely rendered useless. Just concentrating on the market itself it does appear this rally can continue higher.
We are in a new brave world where algo trading and HFT dominate the day’s trading. Without the public money pouring into the market how can this market uptrend survive? The VIX is at 15.32 at the close of the session and at these levels (in the past) the market tends to stall out and correct. Perhaps the computers have rendered the VIX useless and broken the back of the seller. Anything is possible, but it is no way to make trading decisions. Using price as your number one guide you can successfully navigate the market.
In a computer dominated market the Federal Reserve continues to play a significant role in the psyche of traders. Hope is a dangerous emotion as it misplaces confidence. At this point, the only reason for optimism is the Federal Reserve conducting another round of easing. Ask Japan how constant easing has helped out their equity markets. Over the summer the Nikkei hit decade lows how is that success? Perhaps defined by a permabear multi-decade lows would be considered success.
We will remain disciplined in our trading approach and we will not deviate from it. We’ll continue to take advantage of our opportunities and we are not about to gamble.