3/7/2022 – Todays market action summary-
– Crude oil topped $130 (all time high after 14 years) ; SPX down 3% ; if oil prices continues to rise it will slow down US economy and we might enter into recession (but too early for recession )
– Gold hit $2000 /oz ; GLD $184
– DOW enters into correction 10%
– QQQ down 20% ; officially enters into bear 🐻 market territory
– Next support for SPX is 4000 level
SPX chart Analysis
• The chart of $SPX is bearish, with lower highs and lower lows.
• 20 day MA is currently at 4410.
• The 200-day MA is now rolling over and is at 4460.
• It would take a clear breakout over the resistance at 4600 in order to SPX to be bullish again.
• It seems that each time $SPX sells off into that area, the accompanying indicators have already become oversold, and a bounce occurs. This is all part of the difficulty of navigating a bear market, even if one is bearish. The oversold rallies look good for a brief while, causing shorts to cover and encouraging bulls, but then they fail again. That is the pattern that we are in as long as $SPX remains below 4600.
Equity-only put-call ratios remain on buy signals
VIX
• The latest $VIX “spike peak” buy signal of February 24th remains in place, and it would be stopped out if $VIX were to close above 37.79 (its most recent peak high). But overall, implied volatility is giving us a more negative picture than it has in a long time.
• First, the trend of $VIX remains strongly higher, as both $VIX and its 20-day Moving Average are accelerating upward, above and away from the 200-day MA (which is now at 20 and rising). That is bearish for stocks. More importantly negative, though, is the fact that the term structure is inverted and has been, for the most part, since February 17th.
• The front month $VIX March futures continue to trade at a price that is above the $VIX April futures. That alone is a big negative. Furthermore, the term structure of the $VIX futures slopes downward through the first four months and is flat after that (see boxes below). In addition, this week for the first time since the pandemic trading of March 2020, the term structure of the CBOE Volatility Futures was completely inverted. That is, $VIX9D > $VIX > $VIX3M > $VIX6M > $VIX1Y. That is a setup for a “$VIX crossover” buy signal, when $VIX subsequently closes back below $VIX3M. That crossover took place on March 2nd, but only by a few cents and seems to have a good chance of reversing back today. This “$VIX crossover” buy signal is usually a short-term (5-day) signal. So, the bigger picture here is the negativity of the construct of $VIX derivatives.
Updates from last week :
• Markets were all down on last week due to ongoing conflict which is a terrible situation. The conflict is also driving a steep rise in commodity prices on fuel, metals and food which is having a far reaching affect. Inflation was already a concern due to supply chain constraints.
• Fed is stuck because the rising costs are not the result of wage pressures or an overheated economy.
• Money has rotated coming out of some parts of the market and going into other areas ( GOLD and Oil – on fire – VERY BULLISH )
What happening this week:
• Continue to watch the 2 year and 10 year treasury yield for a close in the gap between the two.
• Russia-Ukraine War situation.
• Earning season winding down.
Sectors in Play
On fire – Energy, Rails, Fertilizer companies, Materials like aluminum, iron and copper.
• USO and oil sector XLE and GUSH.
• GDX or NUGT – gold.
• CF, SEED and MOS – fertilizers.
• CSX – rails.
• X, FCX, NUE, AA – materials.
High PE technology and consumer discretionary under pressure and dropping.
• XLY
Earnings:
Earnings on deck for remainder of this week:
• Mon – nothing of note
• Tues DKS, WOOF bmo and BMBL amc
• Wed ZIM, OTLY bmo
Watchlist:
AAPL – $170 resistance for possible call selling.
AMZN – $3200 resistance for possible call selling.
PYPL – lost $100, $95 is now support.
ROKU – $140 is resistance for possible call selling.
SQ – support is back at $100 now after bounce back.
TSLA – $950 still major resistance.