Pro Panel: Summer Volatility Rearing its Head

Things just aren't working out for bears lately -- here's why

   

Put two traders in a room, and one might scream to sell while the other puts in orders to buy. So who’s right? Well, they both could be—depending on the indicators they’re looking at and the kind of trading you want to do.
We’ve rounded up our InvestorPlace advisors to give you their read of the market.

slingshot mild bull Pro Panel: Summer Volatility Rearing its HeadYou’ve Got to Play the Game to Win

John Jagerson and Wade Hansen, Slingshot Trader

Many commentators have pointed to a less-than-robust economy and a corporate landscape that has already squeezed most of the productivity gains it can out of its workforce as reasons why this is going to be a disappointing earnings season. However, these commentators have forgotten about sandbagging.

We anticipate that while the net top-line and bottom-line numbers may not look stellar this quarter, they will still beat the recently revised, sandbagged numbers. This will most likely lead to bullish moves in those respective stocks.

Remember, it’s important to have your own opinions and insights for each stock you invest in, but in the end, the most important factor is what Wall Street believes about them.

markman neutral Pro Panel: Summer Volatility Rearing its HeadBears Can’t Catch a Break

Jon Markman, Trader’s Advantage and CounterPoint Options

Bernanke issued what amounted to a big “never mind!” on his previous utterances concerning the near-term wind-down of quantitative easing. The new statement was much more dovish than we have heard from him in months, highlighting the need to maintain accommodative monetary policy, otherwise known as “cheap money,” for a long time.

Investors viewed those comments as if a party host who had previously pulled away the rum-spiked punchbowl suddenly brought it back into the room, and lined up some gin and vodka too. Woo-hoo!  The Dow Jones Industrials lifted 1.1%, the S&P 500 rose 1.4%, the Nasdaq rose 1.6% and the Russell 2000 small-caps rose 1.2%.

So is that all there is to it? The market bullied the money boss into opening up his wallet? That’s the way it looks at this time, proving once again that the bears just cannot get a break.

trester bull2 Pro Panel: Summer Volatility Rearing its HeadExaggerated Moves on Low Summer Volume

Ken Trester, Maximum Options

The root cause of the current market volatility continues to be uncertainty over the direction of interest rates, particularly U.S. Treasury yields, and the cause of that uncertainty can be laid at the feet of the Fed. Highly accommodative monetary policy is what has driven stock prices higher, and any hint of that policy ending is enough to send stock traders into a tizzy. Fed officials have been busy over the past few weeks backtracking from earlier statements they made hinting at a possible policy change. That backtracking has for the moment brought some money flow back into Treasuries, but the 20-Year Treasury ETF (TLT) remain in a bearish trend and from a chart perspective look to be in danger of falling further.

Also contributing to the volatility is the typical summer slowdown in trading volume, which tends to exaggerate moves in both directions.

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