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Markets Get The Green Light After The Fed. Market Volume Update.

green traffic light

The Fed delivered it’s rate decision on Wednesday, which turned out to be not much of a surprise. And in the absence of any big surprises, markets got the green light and took off on the heaviest up-volume we’ve seen since the last day of January.

Yes the 3-DOG NIGHT was in full force with across-the-board accumulation. More specifically, though, the Nasdaq logged an up/down volume ratio of 8 to 1. Why is the Nasdaq so important? Well, it’s widely considered the leading index and where it goes, the market will soon follow.

Back on January 31st, the Nasdaq up/down volume ratio was 10 to 1, which incidentally was 3 days prior to the last swing high level on SPY (458.12). Once again, we need to take heed of the double edged sword of volume where big up-volume can be seen as a precursor to both upside and downside market moves. In the case of 1/31 and today, the high up-volume ratio in both days on the Nasdaq can be seen somewhat like bookends defining the top and bottom of the swing. Of course we can’t know for sure if this end will play out as a long term swing bottom…

But then again, that’s why we have TVO.

Our volume oscillator had shifted back towards negative values last week, however, today’s oscillator value was the same as yesterday, indicating a slowdown in volume momentum. We still need to see more accumulation for today’s move to gain more long term traction, but for now we do have the spark to start the engine rolling.

Although the big Fed news may be out of the way for now, there’s still quad witching this Friday along with SPY ex-dividend. After some extensive research, I’ve discovered a significant improvement in historical performance of our Next Day Move strategy (NDM) simply by avoiding trades that overlap this tumultous witching period which happens 4 times a year (the 3rd Friday in Mar, June, Sep and Dec).

The Next Day Move UP move designation and all of the probability data behind it is still valid, however, due to the inherent disadvantage of SPY shaving off about a dollar this Friday, short term trades will likely be hold until next week. – MD

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