Tuesday, November 4, 2008

11.04.08 - Upside Range Expansion

Lo and behold, money is coming back into the markets in anticipation of the passing of political uncertainty (see last night's closing commentary). If this is a typical large up day, shorts may mildly dominate the mid-day before another bout of buying into the close off of the VWAP. Watch the Tick and AD lines very closely. They have turned flat for the moment after the explosive morning trade.

However, with the market so short-term overbought and yet another opening gap to fill, I wonder if we won't see some level of profit taking ahead. Also note that volume is non-existent. The 10/14 highs will likely be key in the days ahead. On the other hand, my end-of-day ratio of stock to bond pricing has officially gone bullishly positive. VIX is 45, down another 15%...

10:55AM PST: Note that the real leader over the last several days, small caps, have come down off their am highs even as large caps remain stubbornly elevated. Is it a short-lived rotation/ reversion of the spread trade I mentioned earlier in the week, or is it a leading indicator? Watch it, time will tell. Meanwhile, the AD line is retracing even as Tick and Positive Volume continue higher. These types of divergences are a possible warning as broad market participation levels off.

12:05PM PST: Well that last post was certainly timely to the bar. Indicators are still choppy, but all turned south after the VWAP break. Looks like we've seen the highs for the day afterall...

12:30PM PST: Testing VWAP, should prove resistance ahead of the election close... but with Tick so high it's a tough call -- and, looks like a break higher setting up... hmmm... IWM swinging higher again too -- too quick to call the top for the day? Thirty minutes to go.

12:40PM PST: Closing buyside imbalance -- most bullish election day since 1984? First intuition on the day was the correct one. Now RSI is pushing 97 though -- fourth day over 80, sixth day of strength on declining volume (though today is better than yesterday). Pretty darn high stats. VIX is 47.5.

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