Economic data took a hiatus today while a few Fed Officials made comments. Tuesday’s have been the darling of the market, but no more. It now has become Tumbling Tuesday. Leading to the downside comes to no surprise as small caps suffered the brunt of the today’s selling. The S&P 500 took out yesterday’s lows and quite near some important recent lows. Volume was up on the day, but it was hardly a gigantic volume day. Whatever the reason for lack of volume there simply isn’t a lot and we have seen this for much of the rally since March 2009. It also doesn’t help we have a long weekend ahead. We still remain in limbo and we continue to wait for confirmation in either direction.
Tomorrow’s release of the Fed minutes should give market pundits something to chew on. News scraping Algos will certainly have a field day with comments from the minutes. The nonsense we see afterwards is utterly useless, but what we do want to see is how the market ends up on the session. At the moment we continue to see a trendless market. Sure, the Russell 2000 is still in a downtrend and we would continue to focus on shorting the Russell 2000 stocks. However, the S&P 500 and Dow still remain in weak uptrends mucking up the picture. We will stay on top of any new price developments and react accordingly.
Volatility still remains very low. There are other tools to minimize volatility, but the VIX remains the cornerstone in measuring fear in the markets. At the moment the VIX is signaling very little fear in the market. We have stated in prior commentary a Ratio we calculate using a proprietary formula. At the moment the Ratio sits just under 1.0. Typically we get interested when the ratio begins to exceed 2.0. Here is a chart of the ratio:
You can see we volatility simply isn’t signaling any trouble just yet. All the talking heads can call for a correction, but their timing has and continue will be wrong. Unfortunately, CNBC and Bloomberg need viewers and lots of them to sell ad space. Moral of the story is to ignore the talking heads and listen to price.
We will be back tomorrow with hopefully a bit more excitement from the market.
