A Note On Volume

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).

JPM chart

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.

Subscribe to Options Hotline today to vie for fun and profit.

Best regards,

Steve

 

Don’t Chase

JPM price chart

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.

Best regards,

Steve

Ac-Cent-Tchu-Ate The Positive

bond yields

10-year US T-bond yields, weekly chart by Steven Sarnoff, h/t stockcharts.com

“You’ve got to accentuate the positive
Eliminate the negative
Latch on to the affirmative
Don’t mess with Mister In-Between”
— Music by Harold Arlen, Lyrics by Johnny Mercer (1944)

 

Throughout the summer and now into fall, the spread of very low and, in several nations, negative yields is a glaring warning sign of danger during these uncertain economic times.

As of 10-04-19, here are select 10-year government bond yields:

Canada          1.23%
United States   1.52

Germany        -0.58%
UK              0.44
France         -0.28
Italy           0.83
Spain           0.12
Netherlands     0.45
Portugal        0.13
Greece          1.32
Switzerland    -0.86

Japan          -0.22%
Australia       0.88
Hong Kong       1.04
Singapore       1.62
South Korea     1.36

h/t bloomberg.com

Buying a negative yielding sovereign bond is akin to paying a government to hold your money.  You are buying a loss.  Why on earth would anyone do that?  One reason is the Greater Fool Theory on display.

Continue reading

Island in the SPY

As you can see on my candlestick chart below, Wednesday’s gap down negative black candle line left all of September’s price action as an island reversal pattern.

S&P 500 chart

Chart by Steven Sarnoff h/t stockcharts.com

This price picture implies the likelihood, but not the certainty of a trend change.  The key going forward will be to see how the venerable index behaves on a rebound attempt to fill the gap.  The aged bull market may be tired and we are in a distinct time period of risk.

I see overhead resistance (supply) waiting at $291.50-$295.49, basis the close.

Underlying support (demand) from today’s positive session is at $284.82-$289.12.

Subscribe to Options Hotline today to see how our readers position for fun and profit.

Best regards,

Steve

Your Almost Daily Bit of Wall Street Wit & Wisdom

Starbucks stock price chart

Chart by Steven Sarnoff h/t stockcharts.com

“Seeing lots of trendlines being drawn these days.  Please note that trendlines need at least three valid touches to be significant.”
— Walter Deemer, @WalterDeemer

An up trendline is drawn by connecting higher lows.  It represents support and may exert a positive influence on price.  A down trendline is drawn by connecting lower highs.  It represents resistance and may exert a negative influence on price.

As you can see above, on my daily candlestick chart of Starbucks (SBUX), trendlines provide important information, especially when they are tested.  They are not drawn in stone, but are valuable arrows in a chartist’s quiver.

Remember, even in these days of computer-driven algorithmic trading, technical analysis is as much art as science.

Options Hotline is quickly approaching its 31st year of publication and my 21st at the helm.  Time sure flies.  If you’d like to see how we combine the best of western technical analysis with ancient Japanese charting techniques to generate great options gains from small stock moves, subscribe today!

Best regards,

Steve

Your Almost Daily Bit of Wall Street Wit & Wisdom

herd mentality

Bullish herd mentality, h/t B. Rich / Hedgeye

“Irrational behavior is, ironically, the most predictable behavior.”
— Chris Carolan, @spiralcal

The human behaviors of buying and selling drive market price movement.  Human behavior is often emotional and a herd mentality can kick in.

Market price tends to climb a “Wall of Worry” and slide down a “Slope of Hope.”

You saw it last week, the previous week, and you’re seeing it this week.  You’ll likely see it over the weeks ahead, as well.

Best regards,

Steve

Your Almost Daily Bit of Wall Street Wit & Wisdom

Geodesic dome

Geodesic dome, h/t R. Buckminster Fuller Estate and bfi.org

“I’m not trying to imitate nature.  I’m trying to find the principles she is using.”
— Buckminster Fuller

Often, patterns of market price movement resemble fractal patterns found in nature.

The thing for traders to keep in mind is that there is never certainty, only probability.

I hope your week gets off to a bright start.

Best regards,

Steve

Your Almost Daily Bit of Wall Street Wit & Wisdom

Point drops in any index, be it the DJIA or the S&P 500, are meaningless.  All these ‘3rd largest (point) drop in history’ stories are meant to mislead and scare you.  Don’t let them.  The only thing that matters is by what percentage did an index or stock decline or advance.”
— Jim O’Shaughnessy, @jposhaughnessy