It appears market pundits were citing fears over Greece’s debt and jobless claims helped fuel selling during the morning session. Fear can lead traders to be scared out of positions and certainly occurred today. Volume was running on par with Wednesday’s levels until the final hour, but was still strong. Even with lighter volume the support we saw today highlights this uptrend still has legs as buyers step up at the lows. Although we finished off the highs of the day the move off the lows is evidence this market can continue higher.
There isn’t much more to really say about this market other than check your opinions at the door. Leaders continue to act healthy and they have yet to give us any signals of weakness. The leader I wrote about last night was able to rebound today back into its 50dma, but the rally was weak. I can see this stock punching through its 50dma only to roll over. Perhaps it may began building its left side of a base, but again, its the only leader who has shown any real weakness.
Interesting action in the VIX today as the fear index showed an initial spike but ended the day at its lows putting in another bearish reversal. If you look back at the 2004 NASDAQ rally you’ll see the VIX falling and prices continuing to go higher on the index. We are seeing a similar pattern whereby the VIX index continues to head lower as it continues to see weak price action. Given our market leaders are holding up well, this action we are seeing in the VIX certainly adds fuel to the fire for this uptrend to continue.
Once again the equity call buyers are dominating the options market. By more than a 2 to 1 margin calls outpace puts on equity options, but index calls run just under 2 to 1 disadvantage to puts. Given volatility continues to be on the decline options remain cheap and perhaps why call volumes are higher in individual stock options. Whatever the case may be the overall picture has yet to show sellers getting complacent. Although, it does appear complacency is growing, but we just aren’t at the levels that would put up a red flag. If we have leaders rolling over as sellers get complacent it’ll be a big signal for you to take profits and cut your laggards.
Make it a great day Friday and enjoy the weekend.
I know the put/call ratio signals interest one way or another but how do you determine if those call options are being bought or, sold as a hedge against a drop in the markets?
I am making the assumption folks are buying Calls because they are bullish and MM are simply hedging their sell position of the call. You may be right, it could be folks hedging there as well skewing the data. It is interesting to look at for sure, but it is why I place the utmost attention on the market leaders.
Thanks for reading!
FWIW, I do not pay attention whatsoever to the put/call ratio. I believe the tool is not useful anymore and it has no effect at all on whether I go long in an uptrending market or short in a downtrending market.
I spend zero time looking at it. The same goes for the VIX.
It does make a nice conversation, however. 🙂