Anatomy of an intraday meltup or
Let’s say you are in orbit looking at earth. Looks great but you do not have much clues about how frantic things can be down.
Most have already seen Candle Charts. I like the because they give a clear view of the price fluctuation during the selected period. Here is the SPY ETF (S&P 500 largest ETF) and the light gold line is the OBV.
On Balance Volume (OBV) measures buying and selling pressure as a cumulative indicator, adding volume on up days and subtracting it on down days. OBV was developed by Joe Granville and introduced in his 1963 book Granville’s New Key to Stock Market Profits. It was one of the first indicators to measure positive and negative volume flow.
I tend to believe that market moves have much more to do with mood /psychology & positioning (greed and fear) but fundamentals help drive the narrative.
The next chart is the the tick data snapshot of ….the last candle.
Tick data is the highest resolution intraday data and is the sequence of each executed trade. Tick charts create a new bar following a tick—the previous set number of trades—either up or down. Time charts use the basis of a specific timeframe and can be configured for many different periods. The bars on a tick chart are created based on a particular number of transactions.2 For example, a 512-tick chart creates a new bar after every 512 transactions (here I used the standard 256).
Divergence between prices and tick data occur and can provide insights about coming price moves. The comparative green lines gives a good idea. Prices kept well bid and moving up. Sellers (tick data) seeing the hour passing by (see vertical red and orange line) were “cornered” into a massive short squeeze which accelerated the last 4-5 minutes of trading. Squeezes are very powerful since the pain of losing is much bigger than the pleasure of gaining.
The SPY OBV (first chart) shows, the last few months, that OBV weakness was not matched with similar price weakness. I would say that we had a lot of sector rotation which has led to an overall better price sync and ..lower volatility.
Here we have a similar OBV situation with the futures market. In the absence of price weakness…. pain and positioning become predominant and it favors a meltup outcome.
I have much written about volume and I do believe that:
Derivatives (options) and market makers concentration have become one of the most important driver of the market moves (Gamma “play”). What happens if Vol (VIX) goes down to 14-15 and price “stops” moving fast…?
The SPX index has been a winning lower vol equity play for foreigners.
Anyway…. things can move very fast and Viacom is a good example.
