Daily update 6/20

Very narrow range day.  Here is the daily SPX chart.

They used to say that option expiration day was a volatile trading day.  Nothing could have been further from the truth today.  SPX had less then a 5 point range.  That is unbelievably small at this price level.  That would be a tight range at 1200, LOL.  Breadth was 55% positive.  There were 317 new highs (93 in SPX).  Both those number increased from yesterday.  The futures opened on the high of the day and sellers came out immediately.  However, price did not drop much so they were certainly not very ambitious.  Very narrow range days at the high sometimes turn into short term tops.  Lets have a look at the futures chart.

The futures broke out of yesterday's tight range overnight, but never made any progress after the open.  This is ridiculously low volatility.  Is it a case of everybody sitting around waiting for someone else to buy or sell first?  Last year volatility erupted in gold, then spread to currencies and global bonds and emerging market stocks.  Developed market stocks ignored everything and kept on rising.  This year there is a global collapse in volatility in markets world wide.  Some markets are experiencing historically low volatility.  I have never seen anything like this in my 15 years of studying the markets.  Why is it happening? One of the FED officials remarked it felt like the calm before the storm.  It seems very eerie to me.  I guess we will see what happens.

The first week of the month and option expiration week have the strongest upside bias.  Therefore, those two weeks also have the most short term tops.  Did we just make another one?  I don't know, but a little more volatility would certainly be nice for trading.

I have talked numerous times about problems in China.  I found this chart very interesting.

How is it possible for them to lend out that much money without greatly lowering the credit standards?  They have definitely created the biggest credit bubble in the history of the world.  I think it is starting to pop.  A lot of people seem to think they can manage to let the air out slowly.  I am not aware of any major country that has successfully done that.  I think the numbers are just too big in this case.  I guess we will see, but I think China will be in the news a lot sometime down the road.

The market and sector status pages have been updated.  Have a great weekend.

Bob