Volume can be a useful tool for traders. Trading volume tallies the number of shares (for equities) or contracts (for futures) traded on a given day.
Price is king, but volume can indicate the force behind a price move. This provides valuable information.
For example, on our daily candlestick chart of JPM below, note that over the past few weeks, volume (overlaid on the chart) on down days (black bars) has been greater than volume on rebounds (red bars).
Chart by Steven Sarnoff h/t stockcharts.com
Low volume on a rebound is not a good sign. It tells me the bounce is more of a short-covering rally and adds weight to the evidence in favor of a continuation lower.
As with all indicators, there is no certainty; there is only probability.
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Chart by Steven Sarnoff, h/t stockcharts.com
Options Hotline Update, FYI: Our JP Morgan Chase reco closed +41% in 1 day on a 2% move in the underlying shares, with an always known and strictly limited risk!
That’s Superleverage Power on Display.
Our recommended option trade for subscribers, the JPM December $110 put, triggered yesterday at $2.70 and closed today at $3.80.
JPM closed today’s session eyeing its recent low and a potential visit to the area of its August nadir. The big banks are getting beaten down.
Resistance is now at $112.41-$114 and $116-$120. Support is at $109-$110 and $103-$107.
Is that the type of options action you’re looking for?
I’m now in my 21st year at the helm, as the newsletter created by my father approaches its 31st year of publication.
Subscribe to Options Hotline today to vie for fun and profit.
“Remain calm. All is well.”
— Animal House
Fed Chair Jay Powell, pictured above, discussing the NY Fed’s repo actions and growth of the central bank’s balance sheet, during Wednesday’s press conference.
Operation Repo h/t IMDB, EGA Productions
“All the oil experts from the weekend are now repo rate experts.”
— Hipster, @Hipster_Trader
The repo news isn’t about automobiles. It’s about the beleaguered US Federal Reserve and their large overnight liquidity injections into the financial system.
We wish them Godspeed and good luck, as they try to thread the needle while pushing on a string.
Obvious Man, from Wiley Miller’s Non Sequitur comic strip h/t gocomics.com, Andrews McMeel Publishing
“This is the greatest non sequitur in finance.”
— Jim Grant, editor of Grant’s Interest Rate Observer
The venerable Mr. Grant is referring to bonds priced to yield less than zero.
Deutsche Bank data shows negative yielding debt has topped $15 trillion, representing 25% of all outstanding bonds.
Negative interest rates are not good. They reflect and forecast trouble. They have serious consequences for investors and sovereign nations.
Who would buy negative yielding bonds? See the Greater Fool Theory.
Don’t be a fool and don’t be cruel. Spread some kindness today.
“I am more concerned with the return of my money than the return on my money.”
— Will Rogers
Russell Sage, circa 1870 h/t Hulton Archive/Getty Images
“He wears no crown upon his royal head,
But many millions in his purse, instead;
He keeps no halls of state; but holds his court
in dingy rooms where thrift and greed resort;
In iron chests his wondrous wealth he hoards;
Banks are his parlors; brokers his lords,
Bonds, bills, and mortgages, his favorite books,
Gold is his food, and coiners are his cooks; …”
— John G. Saxe, The Money-King, 1854
Saxe’s lengthy mid-nineteenth century poem is descriptive of the exalted financial state of the European banking families considered to be “Money-Kings.”
In 2019, many of the poem’s couplets ring familiar with today’s growing problem of income inequality.
It’s something to consider, when considering those running for office.
PS My father, Paul Sarnoff, authored a biography of Russell Sage, published in 1965, Russell Sage: The Money King. Sage banked the tycoons and helped shape the Industrial Revolution. He became one of the wealthiest people in US history.
Japanese Black Pine, Japanese Friendship Garden, San Diego, h/t niwa.org
“To me, the poor are like Bonsai trees. When you plant the best seed of the tallest tree in a six-inch deep flower pot, you get a perfect replica of the tallest tree, but it is only inches tall. There is nothing wrong with the seed you planted; only the soil-base you provided was inadequate.
Poor people are bonsai people. There is nothing wrong with their seeds. Only society never gave them a base to grow on.”
― Muhammad Yunus, Creating a World Without Poverty: Social Business and the Future of Capitalism
Nobel laureate Muhammad Yunus founded the Grameen Bank and pioneered the concepts of microcredit and microfinance to fight poverty. Yunus realized that people were not poor because they were stupid or lazy. They worked long, hard hours, performing complex, physical tasks. Their growth was stunted, because their financial institutions did not help them widen their economic base.
The poor had no control over capital. Grameen reversed conventional banking practice by removing the need for collateral and created a banking system based on accountability , mutual trust, creativity and participation. In his book, Banker to the Poor: Microlending and the Battle Against World Poverty, Yunus wrote,“…it is the ability to control capital that gives people the power to rise out of poverty.”
Eradicating poverty provides a path toward peace.
Bonsai is the ancient Asian art of cultivating trees in trays. The shallow confines of a small pot prevent the tree’s roots from spreading. Pruning techniques help bonsai mimic the shape and scale of naturally full size trees.
Enjoy a peaceful weekend!
Actress Betty Field dances the Charleston during a poolside party scene from the 1949 movie The Great Gatsby (Bettman / Getty)
“The financial community is now secure in the knowledge that the most powerful banks in the country stand ready to prevent a recurrence of panic.”
— New York Times, 10/24/1929, h/t John Kenneth Galbraith’s The Great Crash of 1929
This past week’s release of the minutes from the late-January meeting of the Federal Reserve’s policy-making committee reflected a dovish Fed friendly to the markets.
Perhaps overly so.
We shall see. In any event, keep calm and enjoy your weekend.
The First Bank of the United States, h/t National Park Service
“The stock market took a dive today. It was so bad, Goldman Sachs had to lay off three congressmen.”
— Jay Leno
Often, there’s a sad truth in humor. That’s the case here. The market’s recent rebound has coincided with the US government shutdown, hmm…and boosted by sovereign central bank monetary stimulus.
The unfortunate cycle is politicians care about big banks thriving and big banks care about keeping politicians elected. Whom they don’t seem to care about is you.
George Carlin spoke well on this subject.
Enjoy the long weekend!