In my last email I mentioned that something wasn’t quite right in that the markets had made an impressive recovery – albeit on slim volumes – but that the OVI for the indices hadn’t responded in kind.
As I mentioned before, in such situations, either the OVI is being uncharacteristically slow, or it’s telling us something important – ie that the big up-move wasn’t to be relied upon.
Sure enough, it was telling us something important – we had yesterday’s retracement in the Dow, Nasdaq and S&P, followed by today’s big gap down.
The big “news” is that some of the big banks – BAC, JPM, GS – are facing action from the Federal Housing Agency in relation to their alleged negligence during the housing bubble resulting in billions of bad debt mortgages.
PTC members look at the OVI for those three stocks and you’ll see it’s negative on all three.
At the same time, Jobs Data was out today (and disappointed) and yesterday’s action indicated the markets were nervous of this.
Tech stocks were looking more hopeful and the QQQ’s OVI even meandered into positive for a day – though remember, it’s just one day, and today’s action is likely to see its OVI back in negative territory together with the SPY.
So, not for the first time, our observance of the OVI, together with our method of trading breakouts has been a massive help.
All the best
Guy