Market Will Breakout When Volume Returns In Sept – Watch For Profit Taking

September 1, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - The market is so boring that I must've dozed off yesterday. I forgot to post my market comments. Unfortunately, my comments haven't changed much in weeks and you didn't miss anything important. The summer doldrums will end next week and the volume will gradually recover. We are chopping around a support level at $217.50. The selling yesterday tested support and we bounced in the last hour of trading. Once an intraday move stalls, the range is set and the market reverses. This would be nice if we had 20 point ranges. Unfortunately, they are 5 point ranges and the reversal is not worth trading. When the volume does return, the market will breakout of this tight trading range. The longer and tighter the range, the bigger the breakout. I believe the market will breakdown. Option implied volatilities are near historic lows and that is a sign of complacency (fear of a correction is too low). Asset Managers are aware of seasonal weakness and they will not aggressively bid for stocks ahead of an FOMC meeting when Fed statements have been hawkish. We should see some profit-taking next week. I won't start shorting until I see late day selling and a drop below technical support. Watch for a very quiet day today. My trading activity and my size have been trimmed in half. I'm just looking for one or two nice trades each day and they've been hard to find. The jobs report tomorrow will be in line (200 K) and it won't generate much excitement. After the first hour of trading the activity will dramatically fall off. Take some time off and prepare for a busy fall. Possible rate hikes and a close presidential election will keep traders engaged. September is one of my favorite months and the volume will gradually return by the end of next week. I will not be posting comments on Friday. Happy Labor Day . . image

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