Q3 Trading

as we celebrate MLK day, what is the current volatility trend of the markets?



 
Market Focus Report
 
~ January 17th, 2022 ~
 
~ 42nd Edition ~
 

Today we will be discussing the following topics: 
  • What is the most current Market Sentiment?
  • What might our Market Cycle Volatility Trend be telling us?
  • Relative Strength Index - What is it, and how might it can it help us?
Let's Go!
 
 
Estee Lauder

I (We) Have a Dream

King delivered a 17-minute speech, later known as "I Have a Dream". In the speech's most famous passage – in which he departed from his prepared text, possibly at the prompting of Mahalia Jackson, who shouted behind him, "Tell them about the dream!"[160][161] – King said:[162]


 

"I say to you today, my friends, so even though we face the difficulties of today and tomorrow, I still have a dream. It is a dream deeply rooted in the American dream.


I have a dream that one day this nation will rise up and live out the true meaning of its creed: "We hold these truths to be self-evident: that all men are created equal."

I have a dream that one day on the red hills of Georgia the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood.

I have a dream that one day even the state of Mississippi, a state sweltering with the heat of injustice, sweltering with the heat of oppression, will be transformed into an oasis of freedom and justice.

I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character.

I have a dream today.

I have a dream that one day, down in Alabama, with its vicious racists, with its governor having his lips dripping with the words of interposition and nullification; one day right there in Alabama, little black boys and black girls will be able to join hands with little white boys and white girls as sisters and brothers.

I have a dream today."
 
Martin Luther King Jr. (January 15th, 1929 – April 4, 1968)
 
American Baptist minister and activist who became the most visible spokesman and leader in the American civil rights movement from 1955 until his assassination in 1968. King advanced civil rights through nonviolence and civil disobedience, inspired by his Christian beliefs and the nonviolent activism of Mahatma Gandhi. He was the son of early civil rights activist and minister Martin Luther King Sr.
 
Read More at Wikipedia
 
Market Sentiment:
 
As determined by measuring the difference from Mondays open to Fridays close on the SPY ETF, bulls out pace the bears last week (by only a few points), as the markets primarily moved sideways.  The broad markets gained ground slightly from its 462.70 Monday open to close at 464.72 Friday, for a 2.02 point increase on the week.

 
Market Cycle Volatility Trend:
 
Transitioning / Down - Yellow Price Bars
 
~~ As of January 14th, 2022 ~~
 
Market Cycle Volatility Trend Week Ending Friday, January 14th, 2022
 
When looking at the Market Cycle Volatility Trend above, the chart shows us when the financial markets turned to a yellow, higher volatility down trend state last week on January 13th, when our Market Cycle Volatility Trend went from a prior green / up trend condition (for only two days) to now yellow, which means the markets are now in a higher volatility environment relative to recent past.
 
Additionally last week, we put in a low pivot which is higher in price relative to the prior low pivot, and we are currently above the 100 day moving average.
 
What might all of this be telling us about the broad markets, and what might be a game plan for the upcoming week?
 
 
 
Where might the markets go from here?
 
The question now becomes:
 
Where might the markets go from here?
 
 
Last week, with a full 5 days of trading, we had mostly up days with three out of five days where we had the close > open.
 
I think it's important to note that although we are still in  an overall up trend, when we take into account that we remain above the 100 period simple moving average, if support continues to hold where we are now, volatility may come back out of the markets.
 
If this thesis holds true, we may get a fresh round of market buyers continue to which may ultimately be pushing prices again higher, where we can continue to rally from there.
 
Otherwise, a test and break below 454.05 (primary support) - 447.11 (secondary support) area on the SPY, look out below.  Interestingly enough, if we do break under 447.11 - 454.05 area, and trade there in a range, the chart pattern would appear to be putting in the right shoulder of a "head and shoulders" pattern, which as we know, is a bearish market pattern.
 
Thanks for reading...
The primary goal of  the Market Focus Report is to provide perspective on the broad markets to give us an idea what the markets may be telling us from recent activity with technical analysis.  From time to time, we may also be including a review of indicators, strategies, trading ideas, and concepts all in an entertaining format that is interesting to read.
 
Today, I wrote about the state of the markets, including the current market cycle trend using my proprietary volatility trend trading charts on the SPY ETF, where the current market cycle volatility trend is, and where might the markets go from here.
 
Stocks, options, and futures have large potential rewards, but also can and do carry large potential risk. It is recommended for you to be aware of the risks and be willing to accept those risks in order to invest in the capital markets.
 
This is neither a solicitation nor an offer to buy or sell stocks, options, and, or  futures.
 
Questions, suggestions, or corrections?
 
Please feel free to reach out by sending an email, calling, or text on one of my social channels as I would love hearing from you!
Until next time ... 
 
Good luck, stay safe, and happy trading!

Disclaimer: I either recently had positions in these names, currently have positions in these names, or may be taking positions in any of the proceeding names within the coming days or weeks ahead.

Stocks, Options, and Futures have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Do not trade with money you can not afford to lose. This is neither a solicitation nor an offer to buy or sell stocks, options, and, or  futures.

No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed. The past performance of any trading system or methodology has the benefit of hindsight, and is not necessarily indicative of future results.