Another light volume affair in the market once again as a late day rally sends the major indexes into the green. A weaker than expected Philly Fed index sent stocks to their lows of the session. Volume was actually on the decline as stocks moved towards the low of the day. Institutions simply were not selling into the move. Stocks moved in tight fashion until the last hour when sellers took to the market. The last half hour was a different story where a surge of buying hit the market. Volume jumped on the move, but failed to eclipse Wednesday’s pace. A nice day where the market has been able to consolidate its gains after a big run up from its lows.
Many expected, including myself that volume would at least show up for options expiry week. However, that was not to be as volume has been extraordinary low. All week volume has been low which has called into question the validity of this confirmed market rally. While it would be ideal for massive volume to the upside, but so far we have yet to see any hint of institution accumulation. At the moment, the market has been getting support at the days lows which hints there is at least a bid to the market. If the market didn’t have a bid stock prices would fall. When the market begins to show signs of weakness here it’ll be important to make sure you are cutting exposure and your losses.
For the first time the overall put/call finished below 1.0. Index puts continue to be in favor as traders are looking to protect their downside in this market. On the other side of the option game is the equity side where calls have been very dominant as of late. Normally, when the equity put/call is below .6 it signals complacency on the part of buyers. But, then we compare to the index side and it is the complete opposite. While we don’t use the put/call as an indicator in our trading we certainly keep abreast near market turns. To date, the put/call is mixed and yielding very little value to us.
In the short-term the number of stocks over their 20dma remains elevated at 77%. Only 39% of stocks are over their 50dma, a slight disconnect when the number of stocks over their 20dma remains that high. However, we did experience a 2 month correction of 15% in magnitude. Therefore, it is expected that very few stocks would be over their 50dma. These facts highlight the need for the market to continue consolidating gains and building accumulation. There are plenty of stocks setting up with potentially nice patterns. However, time is what they need at this point. The longer we consolidate the better chances we have of making a big run.
Enjoy the weekend and options expiry Friday!
