Equity futures are higher this morning and the bond market is cooperating! S&P futures are higher by 2 points, NASDAQ futures are up 40 and Dow futures are rising 10 points. The bond market is seeing some selling near the open and that has yields on the rise. The money has to go somewhere and it may be going into stocks. Traders should also remember that there's a treasury auction coming up and this may be part of the reason that some of these yields are rising. Fair value today is $9.56 with program buying set for $11.60 and program selling at $7.62.
Watch the VIX
It's been several days since we've talked about the Market Volatility Index (VIX.X) but the chart below tells traders that things have really calmed down in the last ten sessions. I've added two horizontal pink lines on the chart, trying to characterize what I feel are different levels where "oversold" and "overbought" market conditions may exist. I've also added upward and downward trend on the chart and colored them just the opposite of what we normally do with our trends.
Market Volatility Index Chart - last seven months.
My "overbought" and "oversold" levels are simply my interpretation of where I think these levels might be placed to guide me in my trading. As you can see, just because we may be reaching an "overbought" level, DOESN'T mean the markets can't go higher. Just as I NEVER underestimate the power of a decline, I NEVER underestimate the power of a rally. If we simply play the trends, we'll do just fine. Notice how the right half of the chart looks very similar to the left half of the chart.
Rumor and Innuendo
A fellow subscriber informed me late yesterday that an article from Briefing.com stated there was heavy call buying in shares of American Power Conversion (NASDAQ:APCC) yesterday morning and that call buying was leading to the renewal of speculation that Emerson Electric (NYSE:EMR) is interested in making a bid for the company.
American Power Conversion Chart - 60-minute interval.
On January 18th, I alerted traders that shares of APCC looked compelling if the stock were able to break above the $15.50 level especially with concerns of "rolling blackouts" in California. The stock hasn't disappointed and now there's rumor of a buyout. I HATE "rumors" and did my share of buying them in my younger years only to see my account decrease in size. While the above chart still looks very bullish, I'd snug my stop up just under $17 at $16.88. If this stock is going higher just because of "rumor" I want nothing to do with it. However, if it's going up because institutions like the stock then I'll be happy.