Jack's Wrap - Quiet In Front Of The Election....

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It's also interesting to watch how the heavy beta of volatility is suddenly gone from the market place. We had gotten used to, unfortunately, humongous swings from day to day and now with the Vix falling from the low 90's to the mid 50's we are seeing that volatility lighten up and really let's be honest, not a minute too soon. No one really liked it so intense because of the emotional swings from not only day to day but literally minute to minute. At times up to 500 points in 5-10 minutes which is too tough for just about anyone. Now that the Vix has fallen so precipitously we can hope to enjoy things from a more playable perspective. The Vix stayed below its 20 day moving average for the second straight day and this is more of a near term bullish sign than bearish. it doesn't say anything about the longer term or even really much about the mid term but it does tell us that bears are losing their intense grip on things, even if it's just for the very short term. It's giving people a chance to catch their breath and if that terminal pattern on the daily chart holds up, it could mean a multi week or more breather. It's hard to accept that as truth given what we've seen but please remain open to all possibilities. The market has been able to hold on to most of its gains from last Monday's rally and that is a change of character from what we have seen over the past thirteen prior months on any strong rally. Those had been wiped away almost instantaneously but not this one and much of that has to do with the pattern on the Vix which continues to play out.

Today we saw flat futures followed by a flat open followed by a flat day. No one wanted to take control as they wait for the results of the election. Volume was dramatically lighter than the past week. 1.7 billion on the Nas after strong confirming up side volume over the past many days and that too is bullish overall, especially when you add in yet another strong advance decline line for the day even though the averages were flat. More good signs even when things aren't perfect with regards to price. The bulls can hang on to those internals over the past six trading days. Again, and as usual, no guarantees about the future action to come short term but it does point out the more bullish possibilities versus what have grown very accustomed to.

The market continues to handle out or put in a near term bullish flag just at or below the 20 day exponential moving averages across the board. The Dow is above it but because it's only 30 stocks you give it very little energy from a positive perspective. The Sp and Nas remain below although not by much. The Sp and Nas closed at 966 and 1726 respectively. Their 20 days are at 970 and 1732. We're just below and instead of falling hard as many bear market do when you get to the 20's the market is hanging in there. A surprise but we'll take it. It doesn't mean we won't suddenly fall hard but we are seeing yet another interesting change in character. The bulls are fighting where they normally don't or where they normally get overwhelmed by the bears. If we can handily get through the 20's we have a shot of at least getting close to the 50 day moving averages but we have a lot of work ahead of us just to get through those 20's. Let's worry about what we need to here which is being appropriate and not getting aggressively long or short until the proper signal is given. If it is given by a breakout we can play that with long alerts. If we pull back first that too may offer a long side play or two because for now we are still looking very good on those daily index charts. When you have positive crosses near the bottom of the Macd cycle it is very hard to do well on the short side. This is what we have right now thus shorting to me doesn't make much sense.

Three is good support on the Sp all the way down to 925. Only if we were to lose that area would I be more concerned about where this market is heading from a negative perspective. The market is trying to form some type of base from which to work off of. The 60's got somewhat overbought but they are now unwinding nicely without a lot of price depreciation. This normally leads to further upside but of course we respect this market too much to just go and start buying haphazardly. This bear has been different from all others in that much of conventional technical analysis has not worked very well. It's all about going slow and easy and you all know this has worked out well for us for a very long time. We aren't going to start changing that behavior. Let's see how the market handles things after the elections or from any important signal it sends. Watching closely as always.

Peace

Jack

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