WASHINGTON – Okay, we did get the McClellan Oscillator bounce I’d seen coming late last week, for sure. But techs, while attempting to recover, started to fizzle again. Things got worse Friday with continuing news the UK was zeroing in on shares of Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL) for anticompetitive practices. The Brits specifically cited the alleged proliferation of fake product reviews.
Hey, who knew? Anyhow, the shares of AMZN and GOOGL are getting hammered, Amazon for a second day in a row.
Also Read: Fed economic outlook tanks stocks, which were ready to tank anyway
Getting away from the Swamp; or, Why we were AWOL this week
On the personal front, like Chief Bromden said in Ken Kesey’s “One Flew Over the Cuckoo’s Nest,” “I been gone a long time.” Or at least away from my columns for most of this week. Albeit inadvertently. But I’m back on home turf now, having returned from a 5-day visit to the wilds of the Virginia and West Virginia mountains with old friends and our longtime cisgendered spousal units. (On LGBTQWTF “pride” month, no less!)
Anyhow, was great to get away from the rat’s nest of DC and its malign fake politics for a few picture perfect days hanging out in the mountains. But I hadn’t planned to go entirely AWOL this week.
The problem with cellphone apps, and cellphones in general
I had actually planned to contribute an article or two earlier in the week. But as usual, I forgot that mountain regions around here can have spotty Internet connectivity, so that plan was an epic fail from the get-go. We often couldn’t even get driving directions via the usually reliable Waze on our iPhones. The app helpfully kept informing us that “something happened.”
Like some computer programs, nomadic apps continue to prove useless in telling us specifically what the current problem is. But lack of cells was likely at fault. Fortunately, one of our party still carried an old-fashioned direct GPS device. So that technology, at least, worked just fine.
At any rate, I’m now trying to catch up with this week’s weird stock market fun on another Freaky Friday where techs seem determined to decline again but keep getting a small bounce as we approach the final hour of trading. For its part, the shares of Amazon could sure use one of those bounces.
Back to Mr Market…
We have an excerpt today from none other than Tom McClellan himself, the hallowed creator of our favorite chart, the McClellan Oscillator. The last version of the Oscillator we were able to see before our Excellent Getwaway looked like we were heading fast for at least enough of a market bottom that we might get a snapback rally. That rally actually happened this week, more or less on time.
Tom McC offered some comments on this in a short article appearing in the free section of Stockcharts.com, a technical analysis site I subscribe to. Here’s what Tom had to say today. About the VIX volatility index, however, not the Oscillator.
“Anyone can look at the current VIX to get sentiment indications about the stock market. That’s beginner stuff, although still pretty good. The real fun lies in going deeper into data that no one else looks at to find the fun insights.
VIX volatility index as of mid-afternoon, June 25, 2021. Looks like traders are falling asleep as this index sinks to a yearly low.
More from Tom McClellan
“This week’s chart shows the total open interest in VIX futures. VIX futures first traded in 2004, but they did not really get going as a trading vehicle until around 2012, which is where the chart picks up the story. Normally, total open interest moves up and down with stock prices. That’s the normal relationship.
“It gets interesting when open interest moves too far in one direction or the other, or when the behavior changes. Here in 2021, we are seeing a change in behavior. Total open interest [essentially, the overall number of positions] has been falling since the peak in February and is now down to the 200-day moving average [MA], even though prices are continuing higher. This is the change in behavior that is so important to note. [For] the time period since VIX futures first started trading in 2004, the important price tops for the S&P 500 have appeared when VIX open interest is up well above its 200-MA.
“I should clarify further that just being up well above the 200-MA is not by itself enough to put in a top. Prices can keep going up despite such a condition.
…[H]aving VIX open interest below the 200-MA is useful for ruling out the possibility that prices are now at a major top. It is a missing topping condition. So we have some assurance that there should still be a lot more for prices to run higher…. when we see hedge funds getting excited again about trading the VIX futures, and see open interest numbers rising … well above the 200-MA, then we can worry about a meaningful top for stock prices.”
Aside from Amazon and Google, where was Mr Market’s nasty crash?
In other words, the nasty crash I was looking for last week, seems off the table for now, even though that mini-correction creamed a few of my stock positions and motivated me to sell them. Nonetheless, having gone to 25% or more cash in our large account, I’m doing a bit of tentative buying again for the next ride, however brief it might be. We’re going to have to pay the piper for Slow Joe’s dollar-minting efforts. But maybe not just yet.
If those small new positions we’re trying out have any merit, we’ll get back to them in a new piece this weekend.
Meanwhile, we’re getting back to normal here and doing the week’s laundry when we take a break from the trading desk. As of 3:30 p.m., we’re down a bit today, largely because of the UK’s indirect assault on Amazon shares, which actually started yesterday. Our tiny holdings are off today some $45 per share at the moment after a roughly 50-point nuking Thursday.
We’re still ahead on our small position – the per-share price still runs over $3400 – but when AMZN shares get clobbered, it can get pretty bad. So we need to decide whether to trade out and get back in, or just “stay the course.”
Hey, that’s pretty good Washingtonspeak, wouldn’t you say?
—Headline image: Via Comically Incorrect.
