Planning for an Increase in Volatility as SPY Trades at All-Time Highs

Ed Stein Roller Coaster

SPY Volatility Increasing

VIX, a measure of volatility, has been rising together with the S&P500 and SPY for the past 4 days. This was anticipated at the same time as the put call ratio dropped to its lowest level in months. On Tuesday we spoke to members about the scenarios that would likely play out in the short term, as SPY reached a crescendo. The 9ema is one level of support, ascending at 271.00 (+/-) as we start the Wednesday trading session.

Price action last week lead us to believe there was a potential for a small pullback in the short-term. Even still, the last time we produced a red candle of major significance was on December 4.

SPY Volatility

TICK cumulative, in the lower panel, renders “institutional sentiment” on a real-time basis. During the trading session, we often check this indicator to confirm our bias for the day. As this TICK cumulative rises, it confirms institutions are buying more stocks on the uptick compared to what they are selling on the downtick. This cumulative measure of sentiment tells us exactly what institutions are doing.

SPY daily Volatility 01-10-2018

We can safely assume price action will head higher, if breadth confirms intraday. We watch up down volume in this respect.

SPY Volatility

We use the Renko chart to filter the noise and intraday volatility, rendering a trend more discernible. Additionally, we use settings that take volatility into consideration. SPY has remained within a 2.50 points (+/-) intraday range since the November 2016 election. Any close greater than 2.50 (+/-) higher or lower than the previous close would render a change in brick color. A close (-2.50) points lower would print a red brick and alert us to a change in bias for the short-term.

SPY Volatility Renko-01-10-2018

Since a red brick is needed to begin considering a bearish trend, we can assume the trend will continue higher. Obviously that could change today as futures were much lower in the pre-market session. In previous examples March and April 2017 we produced a red brick in price action pulled back for more than a week before resuming the bullish trend.

Tune in LIVE for more on Volatility and Sentiment.

Happy Trading,

Vinny



Bollinger Band Scan One Month Later

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Vinny Gambini

Trade Fundamentals w/ Technical Analysis - CANSLIM method using high probability setups and Ichimoku Trend Analysis. Architect, Family Man and Father of three.