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7 Monster Stock Market Predictions: S&P 500 Rallies, While Volatility Bottoms

By Michael KramerStock MarketsOct 03, 2021 12:41AM ET
www.investing.com/analysis/7-monster-stock-market-predictions-sp-500-rallies--while-volatility-bottoms-200603787
7 Monster Stock Market Predictions: S&P 500 Rallies, While Volatility Bottoms
By Michael Kramer   |  Oct 03, 2021 12:41AM ET
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Stocks rallied to finish the week of Oct. 1, with the S&P 500 rising by 1.15%. The advance on Friday coincidences with a volatility crush, with the VIX, falling by 8.6% to finish at 21.1 on Friday. The S&P 500 also had a relatively soft finish despite a huge buy imbalance at the end of the day, dropping nearly 50 bps from the day’s peak in the final hour. It would suggest to me that the rally was a volatility-induced short-covering event into the weekend.

Like in our example from last week, once the VIX bottomed and started to move higher, the buying in the S&P 500 reversed.

S&P 500 Index Chart
S&P 500 Index Chart

1. VIX

I have found it interesting that each time the VIX spikes and retreats, it corresponds to the S&P 500 making a lower high. For example, on Sept. 10, the VIX closed at 21 and the S&P 500 at 4,458. On Sept. 17, when the VIX was 21, the S&P 500 was at 4,432. On Sept. 22, the VIX was at 21, and the S&P 500 was at 4,395. And on Oct. 1, the VIX was at 21, and the S&P 500 was at 4,357.

It tells us that there is not much, if any, fear in this market currently. Given that, it seems hard to argue that a bottom is in place, especially when the rallies have been implied volatility induced.

VIX Daily Chart
VIX Daily Chart

Nearly the same thing happened with the VIX in 2018, with the S&P 500 making new lows while the VIX made lower highs. It wasn’t until the final leg lower that ultimately pushed the VIX higher, concluding the decline.

S&P 500 Index Daily Chart
S&P 500 Index Daily Chart

2. S&P 500

The S&P 500 futures fell sharply on Sept. 30 once the bear flag broke. Most interestingly, the rally on Oct. 1 seemed to be a retest of that break lower, with the future reaching and touching the base of the flag and then reversing lower. We should see a retest of the 4,300 early this week, with a break lower towards 4,225.

S&P 500 Index 1-Hr Chart
S&P 500 Index 1-Hr Chart

3. Micron

Micron Technology (NASDAQ:MU) is about ready to take its next step lower. There are reports from Digitimes that indicate memory chip prices are heading lower, and that can’t be good for Micron. Couple that with some bearish options bet last week, and all it will take is a drop below support at $70 to get this rolling lower to $58. I got into more detail in my member’s area, which you can try for the first 2-weeks for free.

Micron 2-Hr Chart
Micron 2-Hr Chart

4. Merck

Merck & Company (NYSE:MRK) turned out to work well, with that positive data that came for its COVID treatment pill on Friday. The stock surged more than 8%, rising to a high of just over $84. The options traders did an excellent job with this one. I wrote this last story Sept. 13.

Merck Daily Chart
Merck Daily Chart

5. Ford

Ford Motor Company (NYSE:F) has surged, much to my surprise. It just didn’t work out the way I expected it. So I gave up on this one falling. I had noted at the end of August that I thought it could drop below $12. I suppose it could rise to around $15.

Ford Daily Chart
Ford Daily Chart

6. Teladoc

Teladoc (NYSE:TDOC) continues to push lower, and I’m still waiting for this one to fall to around $114.

Teladoc Daily Chart
Teladoc Daily Chart

7. Walmart

Walmart (NYSE:WMT) looks oversold at this point. I don’t think it has bottomed yet, but that doesn’t mean it can’t have a bounce higher over the very short term. The most logical place to bounce, too, is back to $142.

Walmart Daily Chart
Walmart Daily Chart

Original Post

7 Monster Stock Market Predictions: S&P 500 Rallies, While Volatility Bottoms
 

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7 Monster Stock Market Predictions: S&P 500 Rallies, While Volatility Bottoms

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Comments (2)
Jesus Iglesias
Jesus Iglesias Oct 09, 2021 5:35PM ET
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Michael, we see a lot of mistakes, again, in your posts. We think that thank God there are much better articles by other authors.
ZM Qi
ZM Qi Oct 03, 2021 8:23AM ET
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Big Bear
 
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