June 10, 2014

Steering Through the Obstacle Course – Tuesday’s Chart, $AMZN

crowd of bearsIt is beginning to get crowded as everyone continues to wait for the next ‘big’ show from the markets.  The slow grind continues to leave most traders scrambling for something to trade – and I would include most types of traders as well – there isn’t much to do in the way unless there comes the regurgitated news about a titan that sends the masses of asses flocking to the flavor of the day.  This in turn has kept the elusive “all together now” type move from occurring.  Life’s a bitch!


There are noticeable long periods of non-activity at the all time highs in equity markets and all time lows in volatility.  This game of chicken is getting boring and old – somebody needs to blink and take one for the team.  Even though I really want to I can’t sit back and blame it on the HFT traders it isn’t the algorithms.  They are only performing their prime directives and unless there is a change in the perception and indeed the actual rise or fall of interest rates, there is no reason for the algorithms to be tweaked.  They are operating and obviously finding trades to do.  Remember the majority of HFT traders are usually totally hedged and don’t carry overnight risk.  So each day presents a different set of givens to work with in order to achieve the same result by the close.  It’s all about the numbers and the bottom line.


volatilityThe sector that does present a paradox to me is volatility.   The rate or level of that the sellers are willing to take the VIX , VXX, $VX_F, and UVXY.  It would appear that so long as the capital rotation continues, with Tuesday’s being back into FB and AMZN and somewhat AAPL.  Adjustments bring sellers into the VIX, UVXY, and VXX and that is where I believe the deception continues.  Getting lulled into feeling selling volatility is a hedge against buying FB, AMZN, and AAPL might buying into a huge deception.  I can’t say with certainty exactly who is doing what – but it appears that the larger players are hedging shorts by selling what put premium might be available.  Is it a good play or bad play?  It shouldn’t matter – but it has created an extreme oversold condition within the volatility instruments and an extreme overbought condition within the equities instruments.  The laws of nature tell us that extremes may occur with more regularity but they always resolve and it is this resolution that I’m willing to trade.  The details may get adjusted midstream but the resolution remains the same in that oversold resolves to overbought and vice versa.  The larger the degree (tick, minute, daily, weekly, monthly) the longer it takes to resolve.  What does make a difference is the degree and duration.


The markets continue to move in a tight range at the highs.  Volumes decreased somewhat over what was seen yesterday.  The premium in the futures markets remained for another day as June expiration looms over the market’s head.  Volatility is still getting sold as capital rotates between the broader indexes and within that the titans within the index.  On Tuesday, the capital flowed again into FB and AMZN and less into AAPL, producing a 4.5% move in FB and a 1.5% move in AMZN.  The markets remain overbought and susceptible to corrections.  Keep in mind the higher the pendulum swings in one direction will ultimately produce a much deeper swing in the other direction.  Check out today’s chart in AMZN for trades and discussion.

6-10-2014 1-28-32 PM_AMZN_EAGLE


Steer the course don’t compare yourself to everyone else.  You are not they and they are not you.  Remember to trust and believe what makes you unique at that moment in time and in that situation and allow others to choose for themselves as well.  Don’t be swallowed up by the chaos and false emotions swirling around at times.  Remember it’s just a number.



opportunityTrading the number remains key to being able to reduce and separate the “noise” from opportunity.  This takes knowing and executing a well-defined strategy and allows you to see opportunities amongst the “chaos” and by trusting the mechanics of your strategy, be able to take advantage of them. 


Opportunity continues to knock on our doors.  While it doesn’t come without risk, risk can be defined and more manageable. Volatility and broad moves are exactly what a day trader desires and being able to respond without questioning is a luxury many are unaware of.