Stocks reacted positively to the release of the most recent Federal Reserve meeting minutes. Unfortunately, while price action was nice the lack of volume is somewhat interesting. Where are the institutions piling into stocks? Volume is an indication Institutions are active or inactive in the market and right now they are not active on the upside. Crude oil printed a 104 handle helping push the Oil and Gas sector higher leading the S&P 500. Telecom and Utilities lagged the overall market. The NASDAQ continues to move without a follow-through-day and the lack of volume still calls into question if this market has any juice to move to the upside. At least the Dow continues to lead to the upside.
Volatility set a new low today as the VIX closed below 12 handle since last August. While the last time this occurred the market was able to rally will it continue to rally? Price really will be the number one indication and our rules take advantage any market. However, given the low level of expected volatility any gains certainly will be tough sledding. It most likely signals many will get chopped up because they will fail to follow the proper trading process. It will at least give something the market pundits to talk about.
There are certainly some big boy stocks we are following and will jump on the long side if they give proper signals. We aren’t going to blindly jump into this mess without some protection. If we are able to get a follow-through-day it will make it a bit easier to get in. Once again, the low VIX will hold us back unable to press the gas pedal here. If we were coming off a sizeable correction with the VIX touching more than 20 we would be putting the pedal to the metal. Unfortunately, given the market conditions this simply isn’t the case. Stick to the rules and move forward.
We must play the cards the market has dealt: low volume, low volatility. Almost getting a seven deuce sitting at the final table.
