The truth about this market is best summed up when emotion is removed and it is viewed as pure information (because we all have our biases, but believe me, long or short, no serious trader is happy with this market) and what the truth seems to be more than anything was expressed by an associate of mine that some of you know or have at least heard of him, in the following sentence.
" In recent weeks, this particular market seems to be more about drifting than trending and in the process is doing whatever it takes to bore the majority into utter complacency."
Honestly I can't remember a market this dull since somewhere around the summer of 2007, we all thought it was the Summer Doldrums, but something much more insidious was just around the corner, it didn't feel like that at the time as each day was a carbon copy of the day before it and each day was twice as long as they normally felt.
I had read my associate's statement last night after having looked at 22 different kinds of volatility indices, it didn't matter if they represented the S&P, NASDAQ, forward month, two month out, oil, silver, gold, you name it, nearly every single one was at historical lows and not by a little, deeply in to new lows; only a few lingered near past lows.
I though about what was said above which made perfect sense with every volatility index the CBOE offers, but there are a number of indicators it didn't make sense with, at least the volatility part of the equation, not the market's plausible attempt to move the entire crowd in to complacency.
I even thought about some of my own actions, trading weekly options with 1 day left on them, THAT'S NOT ME. I did it because the market environment demanded it if you wanted to make any money and make money we did, but I thought about every one who is doing something similar and leveraging up to try to make some money in a listless market.
Other than some of the stuff I show you on a fairly regular basis, here are a few things that bothered me about the reality of this extremely low volatility and whether it is naturally occurring (at the exact wrong time of the year for it to appear) or whether it is a move to lull traders in to complacency, send them reaching for extreme leverage and then changing the environment and causing all kinds of havoc.
What kind of market ends the day on average, less than a tenth of a percent on either side of unchanged after a triple (or more) dip recession in Europe is confirmed that same morning?
Other than that, as far as hard data you can't beat breadth, there's no interpretation there, just hard numbers like an advance/decline line and this is something I've spent a lot of time looking at in past markets the last three nights, it's unusual...
(*Indicator is green, comparison symbol is the SPX in red*)
70% isn't a bad number, especially if it were a new rally and building, but 80-85% is pretty typical once momentum is gained, a drop of nearly 20% over the last 3 weeks is not usual, especially not with such a common price moving average relationship.
There's something VERY wrong with the above picture while the market does what it is doing, whether that be an advance, which this really isn't or even holding ground, this is more indicative of a market in decline.
After thinking a bit more about it, I often warn you on a intraday basis that a dull market is a dangerous market because it catches you off guard, I describe it often as being like, "The kids in the next room over being a little too quiet, you know they are up to something".
We aren't in the summer doldrums, the economic data is not flat, world events are not dull.
I'd very much advocate the same advice I give on a 1 day dull market in this current situation, stay on your toes, this near historic drop in volatility is about something, it's not just the market or coincidence. Be careful, be alert.
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