Now that was a choppy day! (Thursday). I got chewed up good. If we go to war, markets are going ballistic. Way too much pent up demand, especially the last few days. Get ready folks! Jay
Chop is what happens when the markets "coil up" before they make a large move. Got to have crappy days to get home runs!
There is so much pent up trading energy out there. When the catalyst arrives to break the market out one way or the other, we should get a period like last July and October when you could trade your face off and make the big dough. The key of course is knowing when that period is over and we go back to low volume, anemic markets. Going forward, I personally think we will see more and more scenarios like this. Long periods of nothing, with short bursts of good trading in between. Got to know when to sit on your hands or change styles.
I think that is probably the trend as well. We had a similar type of action last winter around march-april, when the VIX was declining steadily into the "teens" and everyone was suggesting that we were "mean reverting" as far as volatility goes back to the days in the early to mid 1990's. Then at the end of the first quarter, the VIX exploded and the price expansion became normal again on a daily basis. A few threads about 3-4 months ago with traden4alpha and darkhorse discussed the evolution of institutional action in the markets, with short, swift bursts of allocation and then long droughts where literally everyone is "sitting on their hands". Even this year, we have seen how the majority of movement from point A to point B happens in a matter of days and is so swift, so deliberate and without much of a retracement or corrective phase. Case in point, the first week of January where the market literally went straight up, traded sideways until earnings were released and then began that "death spiral" lower into the end of January. I also get the distinct impression that the landscape continues to evolve from the intermediate and longer term speculators who have basically shortened their time horizons to compete directly with the short term scalpers. Without that intermediate time frame liquidity coming to and fro in the marketplace, this is what we get on a daily basis. So, until there is another "layer" of people willing to buy what the scalper sells and vice-versa, everyone is jumping over the corpse in front of them to get in on those short brief spikes that inevitably turn into low vol. drift for hours, days, weeks at a time...
True - also a lack of panic buying or selling - you can almost tell that the only traders are T/A Pros because the S & R levels are so clean and get respected so much lately. We need Ma and Pa Public to buy or sell stocks again - and their fund managers and brokers need to be busier buying/selling, not just pit traders. The herd mentality seems very thin..... Best, Paul
Shorting is getting to be a dangerous game for several reasons. Short term indicators are oversold, and there are more surprise news events are bullish. Chop may mean a change in trend direction and intensity. I am keeping stops tight for now.