Stock Market Monthly Bifurcation...Volatility Explodes.....Neither Side Yet In Control

Stock-Markets / Stock Markets 2015 Jan 31, 2015 - 11:00 AM GMT

If you're trading this market it's quite likely you're struggling mightily. The degree of volatility is off the charts about as much as I've ever witnessed. The moves from day to day are intense, but even more so are the moves hour to hour, and sometimes less than that. In a twenty minutes span you can see the S&P 500 swing twenty or more points. This process gets repeated many times over the course of a single trading day. No one does well in this environment unless you're taking the highly risky chance of holding stocks in to their earnings report. I personally would never recommend that.

The more you trade the more you struggle. Emotion is the number one headache for traders in this crazy game, but the type of emotion this market is causing is off the charts and makes for so many poor decisions. Why put yourself through that type of situation. It makes no sense whatsoever. You don't need to always have scratch in the game. It can feel really good to have none. Having no emotion at times is soothing. Easier on your soul. Take it easy and let this play out without you. It's fine to be a non-participant. There are no signs that this is about to turn down in terms of the extreme volatility. All things pass in this game. The volatility will ease off in time. Let the game get easier before participating. That's the best advice I can possibly offer at this moment in time.

Let's spend time talking about the difference in the markets from here at home to the DAX in Germany. ECB head, Mr. Draghi, decided to implement a massive, all time, QE program to the tune of one trillion per year and to top it off, he left it open ended with the minimum time being September 2016. It'll likely go far beyond that. The German DAX was up an amazing 9.5% this month. Our markets, on the other hand, had a very different experience with our key indexes down anywhere between 1% and 3%. Talk about massive bifurcation. Nothing like a free trillion dollars to get everything to feel as if their market is protected at all costs.

The froth is running wild. Sound familiar? You bet. So now we're the laggards as froth and nasty looking weekly and monthly charts hang over our heads. After all, what do we have? Just some zero rates? Hey, what's that compared to a cool trillion dollars yearly of cash for those banks to lend out hopefully. Look at our charts tonight of the Nasdaq 100, Dow, S&P 500, DAX, VIX and especially the banks. Now here's a chart. How about down 10% for the month. We are swimming in a world of very mixed markets. Some fair. Some great. Some terrible with massive volatility thrown in. The world of the monthly charts aren't saying much good about our market, but you're very happy if you're in Germany.

While it appears no one is in control, the heavy volatility is normally a sign of a market trend change. No guarantee but the difference now is that the bears fighting when in the past they have not. The hard part technically is that the old, usual things, we could count on such as the 20- and 50-day exponential moving averages no longer are working very well since we blow through them up and down with ease. I'm trying to understand where the markets are going when you can't use traditional support and resistance levels makes things far more difficult to navigate.

You have to look at the whipsaw in general more than price to some degree and since it's so intense we now know there's a real fight instead of a surrender. No one is yet able to declare victory in the truest sense of things but at least the bears have something to hang their hats on to now. The easy days for the bulls are over. Froth is off the charts. That hasn't gone away. Long term charts stink. That hasn't gone away. A defending fed is still with us so the bulls have ammunition but that may be getting a bit old for this market. It's possible froth and bad long-term charts are playing catch up slowly but surely. Keep things incredibly light folks. Stay away. Stand clear until there's clarity.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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