Hi Everyone
Another good day in the offing with stocks today. However, the three main indices are ambiguous. Volumes are weak, though that’s to be expected with this time of year. But more noteworthy is the OVI’s lack of enthusiasm for the impressive recovery we’re enjoying over the past week or so.
All three main indices have made big gains in the last 6-10 days, and broken short term resistance but their OVIs remain subdued.
Now, I must emphasise, I am no “permabear”. And I only advocate “trade-what-you-see” – preferably from solid breakout patterns and concurring OVI readings. Right now the OVI on all three indices is not correlating with the big up moves we’ve witnessed.
There are three possible reasons for this.
– The OVI could be unusually a bit slow off the mark this time – which is fine because we still need to see a tighter trading range from which we can trade a breakout …
– OR … The OVI is anticipating this recovery to be rather short-lived.
– OR … The third possibility is that the smart money is still on its holidays!
SPY
I would have expected the OVI to be in decent positive territory given the extent of the recent move up. That doesn’t mean it was overly tradable anyway (it wasn’t and there were huge whipsaws along the way). But it’s interesting that the OVI is still marginally negative. That could all change today of course, but we still need to see a tradeable chart pattern emerge from this.
QQQ
Similar story for the QQQs. OVI has just penetrated into positive territory, but it’s far from convincing. Today could change all that though.
DIA
Even the normally bullish Dow OVI is subdued.
More later this week – we’ll have had the news by then.
All the best
Guy