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Reports US

US stock market daily report (May 23, 2014, Friday)

May 26, 2014, Monday, 05:18 GMT | 00:18 EST | 08:48 IST | 11:18 SGT
Contributed by Millennium Traders


The Dow Jones Transportation Average (DJT) hit record high territory during late day trading Friday, setting a new 52 week high of 7,995.39 or a new all-time intraday high. The Dow Jones Industrial Average (DJI) continues it surge higher as well, making higher highs. The S&P 500 (SPX) is following the train into new higher territory, ending the trading session on Friday at another new record high.

The S&P 500 consistent higher highs leads one to believe that investors are seeing less risk ahead. The VIX - CBOE Volatility Index - meanwhile ended the session Friday at its lowest level since March 2013. The VIX, also referred to as the 'fear index' is hitting lower lows, something that would imply fear on Wall Street is dropping. Even so, the drop in the VIX means volatility is dropping as well and a drop in volatility doesn't fare well with day traders. Little volatility means higher risk while trading - unless you are a momentum or gorilla trader. That then implies moves that tend to appeal to, the new type of day traders. In and out - the rule of the successful day trader, gorilla trader, momentum trader or active trader - which ever name the individual doing the trading prefers to go by. They are all the same and they all seek the same thing - fast action trade in a matter of seconds or minutes.


What about a potential bubble in the market?

The recent selloff of the Russell 2000 Index, the move that sent it into correction territory just last week, was followed by a 2.1% gain this week. That was the largest weekly gain in over a month. As of the end of Friday, the Russell is less than 7% below its record close of 1,208.65 in early March 2014. In general, small-cap stocks tend to lead the market's advance when the U.S. economy is improving.

Every day last week except Tuesday, the S&P 500 E-mini futures volume was below the 1.52 million daily average of the past year. For Futures traders trading YM and the NQ, last week they experienced several days of very nice trading opportunities, many short lived. This indicates while momentum traders are having opportunities for double digit gains on short term day trades, there remains fewer extensive opportunities during any one trading day. A majority of all trading activity is going on between 8:00am ET and 11:00am ET - after that, its difficult landing a tail on a nice short term trade. The Forex markets too are seeing fewer, short lived moves for short term traders. On the contrary, anything above a short term hold in any financial market takes nerves of steel. Any trade held over night on any market is vulnerable to sudden, unprecedented moves that could break a traders bank.

And while on the subject of the risk on Wall Street, are marijuana stocks any more risky than any other publically traded company? While the Securities and Exchange Commission reportedly have seen a rise in the number of investor complaints pertaining to marijuana related investments - aren't all investment risky? Investors should perform the same due-diligence on any investment, regardless of what it is.