Weekly Wisdom: Does VIX Rip Higher?

Greetings fellow traders and welcome to your October 13th edition of Weekly Wisdom: Levels to Know and Moves to Look For!

Let’s get to what we’re currently seeing in these crazy markets and what we have our focus on going forward.

Taking a look back on this week, October 10-14:

• SPX held below 3,800 resistance into the jobs number that came out stronger than expected last Friday morning with US Sept Payrolls increasing 263k vs 255k est.  Us Sept Unemployment fell to 3.5% vs 3.7%.
• This was pretty much the opposite of what the Fed was looking for – ultimately the Fed wants to see hiring slow in hopes of helping to cool inflation.
• As a result, SPX gapped down and broke through 3,700 support we noted bulls needed to hold, trading as low as 3,568 this week before Thursday’s CPI number.
• Wednesday morning we got hotter than expected PPI numbers with September PPI coming in +8.5% y/y vs 8.4% expected and +0.4% m/m vs 0.2% expected.  This kept markets low and lethargic heading into Thursday’s CPI number.
• VVIX took back the 95 level we mentioned last week on the Friday jobs number move and remains above 100 as volatility continues to expand.
• VIX has risen back up to 34+ but technically has not made a new recent high (needs 35+) – this technically means positive divergence is still in play with no new recent VIX highs despite new lows for SPX.
• Thursday CPI came in hot once again with September y/y CPI At 8.2%, hotter than the 8.1% expected.  Core CPI rose to 6.6%, the highest since 1982.

And here’s what we are eyeing next week, October 17-21:

• SPX has resistance at 3700, 3750, 3800, 3850, 3900.
• Trendline support for SPX from this year’s bounce now comes in the low 3300s around 3325.
• Another buy scenario  to look for would be a case of extreme downside extension – notably the SPX has bounced in times of downside extension 150-200+ handles away from its daily 8EMA – with SPX daily 8EMA looking to be down around 3600 by week’s end, those extreme downside extension buys would come 3450 and lower if we saw those levels sometime early next week.
• Similar to the extreme downside extension, look for extreme upside extension in the VIX as many are awaiting a capitulation type event to look for a tradable market bottom – VIX has not seen higher than 38 this entire year – a move to 45-50+ would be considered extreme. 
• Keep watching TNX the US 10-Year Yield as well – markets will not like another fast move to new highs on the year of 4%+ and beyond – bulls should watch for a bottom to come first in bonds and credit such as $TLT, $LQD, $HYG, $JNK and others
• On Monday October 17, we’ll get data for Empire State Manufacturing Index at 8:30am ET.
• Wednesday October 19, we’ll get numbers for UK CPI and Canada CPI.
• Thursday October 20, we’ll get data for the Philly Fed Manufacturing Index and Unemployment Claims numbers at 8:30am ET.
• Earnings season kicks off with some major banks reporting this Friday morning 10/14. Then Netflix (NFLX) is the first mega-cap to report on Tuesday afternoon October 18, then Tesla (TSLA) Wednesday October 19, and Snapchat (SNAP) Thursday October 20.

Here’s your Chart of the Week:

Could there be a stock market rally? Probably. Would it be the end of the bear market? Probably not.

Source: https://www.marketwatch.com/story/could-there-be-a-stock-market-rally-probably-would-it-be-the-end-of-the-bear-market-probably-not-11665143069

SPY Daily / Weekly Update:

No support for this daily chart as we continue price discovery on the back of rising interest rates.

SPY weekly has support from our bounce trend line from lows this year, now coming in the low 330s. SPY 340 and SPY 320 are support levels as well for now.

Want to Trade With My Team? Click here!

-Patrick Hawe

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