Opening Play for Monday 7/7

7-6-2014 11-24-42 PMCommentary:

Good Morning Traders!

The contraction in volatility shows up not only in the lowest closing VIX reading since Feb 2007, but also in the contraction in the

range of the TICKS.  (see chart above).  The closing Tick reading (5 day MA of ticks) has not hit the overbought readings seen in the past, but still is high.

Other indicators such as the daily RSI and put call ratios are overbought.  The overall trend remains intact with different sectors making

new all time highs each week, but the Nazdaq has pushed well outside the daily Keltner Channels and above its upper channel line, another sign

of overbought and an unsustainable degree of upside momentum. The market has left several downside gaps basis the pit session in all indexes that

can be filled over the next week.

Yields have turned back up and the Bonds made new momentum lows.  The area from last weeks selling climax can be retested to the downside. Watch for a retest of the down trending channel line first.

The EC weekly chart has potential for a Head and Shoulders type of rhythm.  It may well stay in a dull contained range big picture.  The Canadian

DOllar is correcting overbought on the daily charts – It can form a bull flag in another week.  The British Pound is also overbought but all time frames

are in an uptrend and it is unlikely to give up too much ground.

Gold and Silver are still consolidating as the daily Stochastic continues to correct….it is not quite to the lower end of its range yet.

This consolidation can still set the stage for another leg to the upside.

Crude – the daily stochastic is now oversold.  The August contract has good support at 103.65-85 area of previous daily


Have a good trading week!   Remember, Larry McMillan’s work shows that Implied volatility tends to make seasonal LOWS around the fourth of July….knock on wood!



Tradesheet from Snagit