Friday, November 21, 2008

11.21.08 - Third VWAP Test

As the VIX "settles down" to 75 after price plumbed the depths, we are again testing the VWAP (Volume Weighted Average Price) to the upside. It's difficult to say whether we will break it, as AD remains flat while Cumulative Tick moves slowly southward. However, I am encouraged by the multiple tests. Up and Down Volume are reasonably balanced on this expiration Friday.

Speaking of which, I wonder how many option put writers will get stuck holding the bag today? One market observer I respect lays partial blame on this for the downside breakout this week. [Add:] This makes sense to me since I was shorting the Dow yesterday just to get neutral for that very reason -- imagine that behaviour on a mass scale.

By request, I have annotated today's chart. Here is a 'Vault' post describing many of the daily indicators. Closing data was delayed last night, and I have therefore updated the table below.


o Quantifiable Edges/ Market Extremes
o MarketSci/ Excellent Lead-Lag Series
o VIX & More/ Structural Risks
o Reuters/ Goldman Lowers GDP Outlook

9:20AM PST: We are hanging in there by a thread. I'm still hopeful we'll break that VWAP, but this doesn't feel right with Cumulative Tick continuing downward. As a general rule, I won't trade against that. The market is really trendless just now, and did I ever mention I hate narrowing ranges?

9:40AM PST: Tick is picking up some steam. The pivot is just ahead.

10:05AM PST: Back under the VWAP. Tick remains negative.


10:55AM PST: Still a couple hours to go, but I'm sure not seeing any interest in holding ahead of the weekend/ C news beyond precious metals (GLD +6.82%).

11:45AM PST: Supply is being released and it's making me nervous even though it's not a huge imbalance -- only "midly large" ;-) VIX is up over 77.

News: Geithner, our next Treasury Secretary. How is that for timing -- remaining team to be announced Monday. Back up to the pivot/ resistance.

12:35PM PST: Higher prices on resistive volume = short covering. Ride that wave -- but C risk on Monday? Resistance at overnight SPX highs = 785? Made it through... Twenty minutes to go...

12:40PM PST: Heavy supply at yesterday's last "long" entry point from those "stuck" in the low SPX 790's. This is going to be the "five longest bars" into the close... Bounce off of pivot again? Oh yeah. Finish at the Five-day and no delivery baby. Check in this weekend for final stats, writeup will be brief given yesterday's update below. Have a good one.

1 comment:

Anonymous said...

Thanks to your 5 dma insight about the bots I sold my ES longs at 800for 50 handles. It's always a good feeling to unload on the bots before they unload on you. If we manage to rally next week 850 would be impossible not to short. Have a good weekend!