Monday, November 3, 2008

11.03.08 - Quiet Pre-Election Day Trade

It's a quiet day as we've traded in a relatively narrow range ahead of Election Tuesday. Interestingly, sector performances are delinking and diverging from their recent lock-step to the upside. Energy (XLE) and Consumer Discretionaries (XLY) are down over 2%, while Consumer Staples (XLP) and Transports (IYT) are up over 1%. Could change be in the wings?

Technically, while the AD line has been flat, we have generally seen more positive Volume and Cumulative Tick is also positive on the day. VIX is down 8% to about 55. On one hand, long-term indicators are suggesting the possibility of a large upside break-out. On the other, short-term indicators are very overbought, making it a worrisome day for swing traders. Perhaps not a bad period to be partially hedged, at the very least.

11:20AM PST: Down volume is leading (last 30 min) as the tick slope reversed (last 60 min).

12:35PM PST: Price is coming back... really just flat. Volume is the lowest it has been since late August.

CLOSE: Although volume was (very) light today and we are technically overbought, I agree that this feels like consolidation with some accumulation on the margin more than anything else. [Add: As opposed to a set up for an immediate swing lower.]

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