11.20.14 – Pushing ‘Em Forward

Yesterday the market pulled back; today it pushed forward with the Dow Jones Industrials adding 16 points to close at 17,701.85.  The S&P 500 Index gained .20% while the Nasdaq Composite tacked on .56%.  Chipmakers were higher after Intel raised its dividend.

Gold continues to perform well, with GDX, the gold miners ETF, gaining 3.34%.  Its little brother GDXJ did better, climbing 5.54%.  XOP, the S&P Oil & Gas Exploration and Production ETF, was up 3.23% but is still in the downtrend that began last June.  FCG, the natural gas trust ETF, floated 3.65% higher.  Please click on the symbols for details.

Bollinger Bandwidth continues to narrow as it coils tighter.  The BandWidth is now .261; anything below .30 is considered Squeezed.  We have a very similar pattern in the Nasdaq VIX, the VXN, where the BandWidth has narrowed to .2751:

VXN-QQQ

It isn’t a matter of if, it’s when.  Volatility will increase and revert back to its norm.

I like what I’m seeing in the price action of IWM, the Russell 2000 ETF, but what I don’t like is the volume action.  Please take a look at the daily chart below:

IWM

After topping on July 1, 2014, IWM pulled back and bottomed on October 15, 2014.  After that it recovered a little more than 78.6% of the decline (blue Fibonacci series) and then it pulled back to the 61.8% level.  It bounced sharply higher today.  A more recent Fibonacci time analysis shows that IWM retraced 23.6% of the price rise since bottoming in October (red Fibonacci series) – a shallow and potentially bullish development.  See where the red and blue lines almost overlap?  That’s called a Fibonacci price cluster.  These clusters tend to act as strong support or resistance levels.

But what about the weak volume?  The more-or-less horizontal black line running through the volume bars is a 50-day SMA of volume.  The price thrust that sent IWM to its high last week was on very low volume and generally speaking, low volume on a price advance is not very bullish.

But take a look at the Price Zone and Volume Zone Oscillators, PZO and VZO.  Developed by my friend Walid Khalil, the oscillators reflect buying and selling pressure in a security.  It’s bullish for VZO to have a greater value than PZO when the ETF is rising in price, and bearish for PZO to have a greater value than VZO.  PZO is on the left and VZO is on the right:

IWM VZO

Today PZO was 13.38 and VZO was 13.70.  So despite volume being well below average, there seems to be no major selling underway in the small caps.

Well, that wraps up the week for me since I’ll be unavailable tomorrow afternoon.  Enjoy your weekend.

About Dave

David Steckler enjoyed 24+ years of experience as an investment counselor and portfolio manager before retiring. A former professor at Lindenwood University in Missouri, he also was a member and past president of the American Association of Professional Technical Analysts (AAPTA), and a member of the Market Technicians Association (MTA).
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