Market Direction intraday is as expected – sideways while investors wait on the Fed. Meanwhile Gold Bugs aren’t waiting as they are pushing up the price of gold in anticipating that this morning’s USA GDP contraction number will keep the Fed pumping liquidity into the financial markets and continue to perhaps cause inflation down the road. It has been five years of the Fed pumping in billions and there is still no run-away inflation so perhaps being into Gold is not the best of ideas. I don’t follow the daily musings on Gold but I do love Put Selling ABX Stock.
Market Direction Action Intraday Jan 30 2013
The big news in tech stocks today had to be Research In Motion which unveiled the much-hyped BlackBerry 10. On top of all the glitz cam the news that RIM will change its name to BlackBerry and trade under the symbol BB on the Toronto Stock Exchange and BBRY on the NASDAQ. I am not sure focusing on the name and limiting themselves to BlackBerry is a smart move or not. Apple has a lot of different products and therefore their name is excellent at conveying it but BlackBerry seems too definitive. I always thought RIM was a good name.
The BB10 device I think is just not going to make the inroads a lot of investors think. Many businesses have switched to Samsung or the Apple phones and for a lot of them the cost and logistics of returning to RIM, er.. BlackBerry, is not practical. I know I have no interest in owning shares even at today’s prices.
Stocks sold off a bit in the morning with some profit taking but overall the mood is simple – wait for the Fed before pushing the market direction higher. Meanwhile the news that US GDP in the fourth quarter contracted 0.1 percent didn’t seemed to shock the markets although it has helped to stall the market direction rally while waiting for the Fed news. The contract is the first in three and a half years and some of it will be as a result of Hurricane Sandy and a decline in defence spending. There were however gains in consumer spending and residential investment.
Next quarter GDP may not be significant better because of the payroll tax cut so that will be something to keep in mind.
I found the news yesterday of Microsoft possibly being involved in taking Dell Stock private, quite interesting. I don’t know if spending 1 billion for this venture is worthwhile but for Microsoft 1 billion is small when you look at their war chest filled with billions.
Market Direction Intraday Chart – Flat
The intraday market direction chart of the S&P 500 finds the market surprisingly flat awaiting the Fed’s announcements. This should not be the case if the market direction higher is continuing strong. Instead the market direction should be creeping higher into the Fed announcement. This flat market indicates that the GDP number did spook some investors and it shows that the mood may be changing among investors who are perhaps beginning to believe that with the S&P 500 above 1500, the RISK ON trade which I previously mentioned is very real. This could be good news for those of us who do Put Selling as a principal investment method. Higher volatility means better put premiums to be selling!
Market Direction and VIX Index
I wrote an article this morning looking at the Risk On trade that has been developing as the VIX Index after setting a low not seen since 2007 at $12.30 on Jan 23, is now up 14% and today traded over $14 for a short while.
While market direction continues to point higher, there are many warnings signs that the rally is running out of steam as it were and market direction may change.
Keeping a watchful eye on the VIX Index is worthwhile. Before it was introduced in the 1980’s I used to have to study a lot of option trades and a handful of big cap stocks to try to gauge market volatility to determine market direction. It was a labor intensive couple of hours daily to predict market direction for my trades. Since the day the VIX Index was introduced I have never done another calculation. It takes just seconds now to review the clues the VIX Index provides as to market direction. Here is the link to my VIX Index article from today.
Market Direction Outlook And Strategy
Intraday the Fed may move the market direction more than investors are prepared for. There have been some rumblings about an early termination of the bond buying program but I think these rumors are wrong. To stop the quantitative easing now would be a poor choice considering that housing in many states seems to have finally bottomed, the Weekly Initial Unemployment Insurance Claims are reaching new lows and GDP remains poor. I cannot imagine the Fed stopping the quantitative easing at this point in the recovery. The afternoon market direction should be interesting to watch.
Internal Market Direction Links
Profiting From Understanding Market Direction (Articles Index)
Market Direction Candlestick Daily View (Members only)
Market Direction Portfolio Ongoing Trades (Members only)