My Trading Licks

Overall volume fell over 10% in Friday’s session with the up/down volume ratio just about even across the indices. Our Heat Gauge was on the bearish side at BALMY, which is just a bit warmer than COOL (when up/down is around 50/50).

The Fed spoke this week and, as usual, rocked the markets by telling us what we pretty much already knew. The news effectively and conveniently sent SPY back to the 200 day moving average where institutional support was waiting with open arms. In just the first week in April, though, the series of accumulation days we had back in March has already given way to 3 across the board distribution days, including this week’s Fed day.

Is this just a case of April showers before the market springs back into action or a harbinger of more doom to come? Well, TVO, our long term volume oscillator, did change direction on Tuesday, the day before the Fed fireworks, indicating that smart money was already anticipating the hawkish comments and adjusting their portfolios accordingly.

TVO itself, however, is still in the 0 to 3 healthy market range, and considering the drop in volume along with a SPY inside day right on the 200 day MA, it’s likely that most of the downside has been tested for the time being. We’re holding long term calls, but due to the expiration date approaching, it’s likely we will lighten the load in the next week or so. There are lots of reports to look out for as potential catalysts this week, including Consumer Price Index on Tuesday and Retail Sales on Thursday, but otherwise we’re looking for the consolidation trend to continue. – MD

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