Volatility Returns…For A While
It was certainly nice to see a little volatility
come back into the market, although the afternoon was a bit more
orderly. The best trades were naturally off the Consumer
Confidence Number at 10:00 a.m. EST. Given that the number came in so
far above expectations, you needed to be getting long, aggressively, in a split
second. The move up was great. Today’s release, at 10:00 a.m. EST, of New
Home Sales may very well offer some great volatility plays if that
number comes in far better/worse than expected. The consensus is for a gain of
890,000.
As the morning wore on, however, not only did the volatility wane, but the
market gave back almost all of its gains. This was certainly not encouraging if
you were counting on that number to be a catalyst to reverse the recent slide. A
couple of negative news items from Tyco
(
TYC |
Quote |
Chart |
News |
PowerRating) and Waste Management
(
WMI |
Quote |
Chart |
News |
PowerRating)
(thanks to one of the participants in TradersWire for that heads up)
offered some great setups on the short side, as well as some nice reversals off
of what some may call an "overreaction."
While I am not a trader who usually bucks the overall trend, one of the
nicest trades off the day came off a KTN,
1135. The market tested that level twice before grinding up 6 points into the
close. Although I did not take the trade, I point it out to illustrate the
effectiveness of trading with support and resistance. The five-minute chart
below tells the story:
As mentioned in yesterday’s column, given the overall reduced level of
volatility recently, I am able spend a bit more time in TradersWire
offering some insights intraday as I see certain setups and chart patterns
developing.
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 1170 | 1495 |
| 1163 | 1485 (key resistance) |
| 1156-57 (confluence) | 1458-60 |
| 1145 (opening only) | 1443 |
| 1126 | 1435 (critical support) |
| 1116-18 | 1407-09 |
| 1386 |
Part II in my series on Single Stock Futures
(SSFs) will appear on Thursday. This week’s piece will discuss the mechanics of
SSFs, contract size, leverage and profit and loss calculation. (To see Part I of
this series, please
click here.)
As always, feel free to send me your comments and questions.