Here’s why volatility is about to increase
Wednesday’s session was one of dull
consolidation. We made our money in the first 4o minutes of trading, and stepped
aside to enjoy other things in life than staring at lifeless screens thru the
afternoon. Two sessions left this week, with no directional or wide range events
occurred as of yet, there is hope for a normal range / trend session by
ES (+$50 per index point)
S&P 500 failed at its daily pivot resistance
twice, then chopped sideways in an upward coil to the close. “Rising in agony”
is how it could aptly be described. If price action breaks above 1236+ on
Thursday, she might be headed back up to revisit 1240s again. Failure to do that
ushers in a trip south to 1218 or so.
ER (+$100 per index point)
Early failure at the pivot offered short side
profits in the Russell on Wednesday, then it was a scalper’s chop & flop from
there. ER has 660.50 to contend with before 667 and higher is possible.
Volatility levels spiked to 16+ and 17 thru
most of October, ushering in ideal day trading conditions. Sessions were rife
with wild swings up & down or big trend moves directionally from open to close.
In November, volatility collapsed back to
recent decades’ lows range once again. Four days ago we see where VIX levels hit
lower Bollinger Band two deviations away (green) value from its 30-period
average (not shown). Price action has traded below the 10-day exponential
average (blue line) for the past ten complete sessions and counting. Until this
pattern breaks, sideways congestion and a fight for intraday profits will
continue. Once VIX levels are on the rise again, big profits and trend trading
will prevail again.
October index option contracts (European style) cease trading today
and settle out in value on Friday’s averaged open. Friday is the expiration of
equity and ishare (American style) options. The next two sessions could be rife
with some gyrational swings, may be wide-range or trend sessions overall. Next
week’s holiday event usually brings solid trading potential, with many pundits
expecting the year-end rally to be launched. Sounds good to me. So does an
extended decline. Just pick a direction and go… we’ll trade it profitably
Trade To Win
(Weekend Outlook trend-view section…
Austin Passamonte is a full-time
professional trader who specializes in E-mini stock index futures, equity
options and commodity markets.
Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.