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Tuesday, June 11, 2013

The Only Beneficiaries of the Dog Days of Summer

Image representing IBM as depicted in CrunchBase
Image via CrunchBase
The market looks headed for very low volatility in almost all areas

The economic focus was not on the United States but Japan. The Nikkei 225 jumped 4.9% following an announcement that the country’s current account surplus was double analysts’ expectations.
McDonald’s (MCD) led the Dow stocks with a gain of 1.3% following a 2.6% increase in global sales in May. However, the Dow closed lower as losses for IBM (IBM) and 3M (MMM) offset MCD’s gains.
At Monday’s close, the Dow Jones Industrial Average was off 10 points to 15,239, the S&P 500 fell a point to 1,643, and the Nasdaq gained 5 points at 3,474. The NYSE traded 595 million shares and the Nasdaq crossed 369 million. On the Big Board, decliners were ahead of advancers by 1.3-to-1, and on the Nasdaq, advancers led by 1.8-to-1.

Chart Key
It felt like the “dog days of summer” had arrived. With low volume and a stock market so sluggish, I was reminded of a rain-delayed double-header that my wife and I suffered through back at the old Vet in Philly.
But there was one index that was jumping. The small-cap Russell 2000 broke from a short-term bearish resistance line that has been in place since May 28. It had reversed on Thursday on a buy signal from our proprietary indicator, the Collins-Bollinger Reversal (CBR), and has picked up enough steam to gain support from the MACD indicator.
Monday’s pop closed the index above its 20-day moving average, and so the next move by the small caps should be a challenge of the May 22 high at 1,008.
Conclusion: The trends are all positive. But traders may be the only real beneficiaries of a market that looks headed for very low volatility in all areas but the mid- and small caps.
Many investors will no doubt head for the beach. But those willing to take a plunge into the world of leveraged ETFs, like the Direxion Daily Small Cap Bull 3X Shares (TNA) or Direxion Daily Small Cap Bear 3X Shares (TZA), could ward off the summer boredom.
Just make sure that you understand the high risk involved in trading these bouncing balls and keep in mind that they are not investment vehicles but day trading devices. Obviously these ETFs are only for the fearless. ...
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