Waiting for the Train to Arrive; SPY Volatility Whipsaw
The markets are up, the markets are down, as anyone who trades SPY lately can attest. The whipsaw from strength to weakness persists. That said, volatility in the Nasdaq is a bit heavier than the S&P500. The train hasn’t arrived at the station, so patience is the word for the day.
Summary
S&P 500, SPY – The Economy
The U.S. economy grew at a 3.5% annual rate in the third quarter, the Commerce Department said Friday, easing from the second quarter’s blistering 4.2% pace. Wall Street economists had expected 3.3% GDP growth. – IBD
The 10-year yield was trading lower in response to the morning GDP report. Last week we saw weakness due to the spike in rates.
SPY Volatility
SPY is showing a potential bounce after testing the recent lows set on Wednesday and Thursday at 265. TICK cumulative is still improving, despite the volatility.
Given the sharp rise in volatility and the lack of conviction, it looks like we will end the week the way we started three weeks ago. We will trade smaller and fewer positions, with a focus on value stocks that pay a dividend. Any new positions taken will be day trades until further notice.
This is not a time to make rash decisions. The divergence pointed out in September gave us time to exit positions. Entering new positions should be taken with the same patience and only when we see a clear trend, with volume marking conviction. Without institutions, we’ll go nowhere.
Futures are rising from the pre-market lows. Check here:
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Happy Trading,
Vinny
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