Don’t like the weather….?

Posted on Jun 30, 2017 by in Letters

http://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=0&mn=6&dy=0&id=p70142979615&a=266398464

Mark Twain famously said, (of weather in San Francisco) If you don’t like the weather here wait a minute.  That is still true.  Weather is insanely variable in San Francisco.  Obviously, the same can be said of the market.  If you don’t like it wait a minute.  Bears attacked the market Tuesday.  Bulls counterattacked Wednesday, and then Thursday the bears put on a serious raid.  All this and prices still within the relatively tight rectangle (or congestion zone).  Volatility  picked up noticeably  with ranges of 20.77, 23, and 37 points.  The market is nervous as a cat on a hot tin roof and this activity  didn’t help.

Notice how buyers are waiting to snap up heavily sold issues. Look at the candlestick for today:  A vigorous sell off which finds buying at the bottom.  To explicate:  the black long bar shows prices falling and closing down.  The line (or shadow) probing down shows how far prices explored downside.  In the Dow prices traveled a range of 290 and shed 167 points.  Such days are never comfortable.  But–down momentum stopped promptly at the limit of the pattern.  Now that horizontal line represents an important support zone.  We view all of this as ephemeral drama  and something which will be seen as a buying oportunity and certainly not something causing the liquidation of positions. As always you never know till later, but there is no reason in the chart to exit.  As with roller coasters uncomfortable moments may occur.

As readers know the $vix measures the nervousness in the market.  Here is a picture of a very volatile time:

http://stockcharts.com/h-sc/ui?s=%24VIX&p=D&yr=0&mn=6&dy=0&id=p98568891949

The radical action today reflects what was happening with prices.  Volatility started the day at 9.79, touched 15.16 and finished at 11.44.  Just looking at the chart the reader can see a picture of  panic and distress.  Readers should be immune to these emotions which are the province of day traders and swing traders.

Go to a parade and barbque and let senators get indigestion.  Happy fourth.

 

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