Committee - Friday, page-8

Are we there yet? Evening Liqueurs. Thursday, 7 January, 2016.

XJO down -2.2% (ouch) on increasing volume.

Here's the chart:



When you look at the chart, despite all the headlines, we're still in a trading range where we've been since mid-August, 2015. That's five months. Yes - five months of going nowhere with relatively high volatility.

But - how bad is the volatility now compares to August, 2015?

Here's the chart:



Not that bad. We're not seeing anything like the volatility we saw in late August. It's more like the volatility we saw mid-november, and mid-December. Both of those saw bottoms. No guarantees, especially about tomorrow. But this looks like history repeating. We are at or close to a bottom.

Today, STW (the ETF tracking the XJO) saw a climactic selling action. We haven't seen anything like this in the past two years. Somebody (bodies) pulled the pin on their holdings in STW. That looks like panic selling. When you see panic selling, contrarians insist that you've got a buying opportunity.

Here's the weekly chart (with one day to go) of the STW with Volume in the lowest panel:



The STW tends to be an index which follows the XJO - it must - that is the STW Mandate. But when we see a huge volume spike - something special has happened.

You'll see, for example, by looking closely, that previous volume spikes (dwarfed by today's action) have tended to correlate well with market bottoms.

So, today - either somebody has got it very, very right, or very, very wrong.

I'm betting on the wrong side.

The STW still isn't terribly oversold, but the RSI is now approaching the 30 level. That's usually good for a bounce.

RB