The market gave a head fake, as traders say, to the downside near 7:00AM PST. But then it started up and did not return. The Russell broke out of its trading range and held its advancement. As the charts below show, the RUT– as traders know the Russell options cash index– broke into a new Darvas-like box; yet it remains in its ascending channel.
Once again, as the chart on the right shows, the RUT made a 20-day high close. Rarely do markets see such as sustained (a 3+ standard deviation) move. This will cheer the millions who hold long-only positions in retirement accounts. Traders, however, like volatility.
This chart shows the intra-day action of the SPX (S and P 500 cash options index) against the VIX (volatility) index. Volatility was highest at the open and fell as prices rose.
I put on some downside hedges to reduce delta exposure at the close.
When measured from the nadir of the recent market move, post-USA election that is, a clear inverse head and shoulders pattern seems to indicate that we’re at or near the measured up move. No one thought it would happen without a meaningful pull back, however.
I’m fully prepared for agitation from the media to shake some coconuts loose. But if this doesn’t happen (and we might guess that the government has got its act together with regard to increasing the retirement holdings of baby boomers), the news will soon get out that the market is the place to be. I’m told that when this happens “it doesn’t end pretty.”
Volatility remains the indicator to show where market movers are setting up for the event they’d like to realize– through their own actions.