Sunday, February 4, 2007

Equity Index Update

Equity Index UpdateSocialTwist Tell-a-Friend
Brad Sullivan
January 30, 2007

The index markets continued to trade on a dollar flow rotational basis as large caps were weighed down for the second session in a row. Meanwhile, small caps continued to catch a strong bid that began around mid-session on Friday. The Russell 2000 --- notably the only index of the five I follow not to make a new trading high during the past several weeks --- found continued strength as players seem to be rotating money back into small caps.

The session was marked by light volume and moderate trading ranges as players anticipate what is in store for the remainder of the week. On that front, today will bring Consumer Confidence expected at 110. In addition, MSFT released Vista and INTC announced a new chip yesterday. Yet, the indices remain a bit sluggish ahead of the FOMC meeting and earnings from GOOG on Wednesday. Furthermore, the overhang of Friday’s employment report continues to leave the market with overhead supply in the near term.

I have enclosed a rather sobering look at the complete meltdown in volatility across the index board. The chart captures the Russell 2k, SPX, NDX, DJIA and Midcap 400 with their respective 22day standard deviation readings, the 200 day MA of that 22 day STDEV reading and the 10day standard deviation readings. It is interesting to note that only the NDX is trading near its 200 day MA of the 22 period reading, the other indices remain around the -50% level from their respective MA levels. Simply put, this is telling me that something is bound to change in terms of intraday trading ranges, the only question is when?



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