Big up day on light volume

The only real notable event today was the ISM (Institute for Supply Management) released their June manufacturing index. The index was 56% which was a bit higher than the market was expecting. This eased the minds of some in that it suggests a lighter inflation picture. Remember that the markets are all about greed and fear. The bulls and bears will jump all over any news that feeds them. While there was food for the bulls today it only takes something else to turn the table and get the bears hungry.

The market advance today brought AKS up to my buy point. AKS was entered long @ $38.58.

Current open position BIG also advanced well today and got close to the second buy point for adding the next 1/3 of the swing trade funds.

Watch list item WDC also advanced fairly well today and if the upward move continues then we will reach the buy point.

Some subscribers to RebelTraders knows I am long on FRPT as a long term play. The close on Friday was a great price for any new investors. Today that proved to be correct. FRPT rallied almost 10% today. And after the close of the market today there was news that Congress may be adding additional funds to purchase 4 times more vehicles, the type that FRPT builds. This will most likely add to the momentum in FRPT.

On the DOW index we are still stuck inside this trading range that we have been in for a month now. We really need to see a move out of this range in order to see the market regain some composure and get the volatility back down and stable.

Fp80

Volatility kills the market again

That darn $VIX !! Today, just like yesterday the VIX spiked again and today it ended the day at the highest level of the week. The chart below is the volatility chart for the past two days (5 minute chart).

The markets have become extremely hostile for us traders. Even long term buy and hold investors are seeing some of their gains from the early part of this year slip away. Again, just like yesterday some money was placed on the table to only have the pit boss (bears in this case) take it away. More later...

Fp80

We are stuck in this range still

Trading is oscillating back and forth within a range. there is no conviction at all to the market direction. Again, this is why I'm not taking any new trades just yet. And you should not be trying to enter new swing trades here either. With the trading moving back and forth within a range the chances are good you can get stopped out of your trade.

Remember that as swing traders we want as many forces working in our favor for us to succeed. This volatility is not one of those forces we want.

Today the market has gone up fairly well at one point to again have it all erased. There is no need to fight this action.

Made the call...

Yesterday I was not liking how the market was looking early on in the day. Too many trades were going through that gave me the feeling that some big money was quietly looking for the exit.

I sold my open positions yesterday and locked in the gains up to that point. I did not want to see them evaporate in what was shaping up to look like a trap for the bulls. Even though the market ended the day yesterday up it still looked like a trap. And today that feeling of a trap was evidently true. The bears came out of hiding right as the market opened and ran off with the bulls lunch (money)!



This morning I said as the market opened that today was a day to stay out of the markets. That the volatility would spike today. And it did. So what is this volatility (which we measure by charting the symbol VIX)?

Volatility is the measure of the tendency of a market or security to rise or fall sharply within a short period of time. It is typically measured by the standard deviation of the return of an investment. Standard deviation is a statistical concept that denotes the amount of variation or deviation that might be expected. So what is this VIX thing?

The VIX is a measure of the volatility of options prices on the Chicago Board Options Exchange (CBOE). The VIX, even though is a measure of options pricing has become a popular gauge for the overall markets' volatility. And we can use it to give us a visual presentation of just how volatile a market is. In general when the VIX goes up then the markets are more likely to have wild price swings.. or even a downright sell-off. When the VIX is low the market is considered 'safe' and investors are more prone to enter a trade when they feel it is safe.

Think of VIX as an earthquake Richter scale. When it goes up then everything starts shaking, and crashing down! When the VIX is low everything is safe and stable.

As an example. If you were to apply the formula that makes up the VIX to your certificate of deposit at your local bank which offers a fixed rate of return you know what the volatility measurement would be? Zero of course. If you have a rate which is locked and can not change then there is no deviation and subsequently a zero volatility.

There are three variations of the volatility indicators

• VIX tracks the volatility of options within the S&P 500


• VXN is for the Nasdaq 100


• VXD is for the Dow Jones Industrial Average

But the VIX has become the most popular for traders to gauge the overall market volatility. The chart below shows the relationship between the VIX and the S&P 500 SPX

Notice on the chart that the S&P 500 index (red) takes a dive when the volatility (blue) spikes. Day traders love a little volatility in their coffee each day. But for us swing traders and position traders too much volatility can play havoc with our setups. So the smart thing for us to do is to wait out the storm. When the market settles down then we make our moves. And when an earthquake hits we duck and cover and hold our chips close!

Fp80