Sign up to create alerts for Instruments,
Economic Events and content by followed authors
Free Sign Up Already have an account? Sign In
SAURABH KHARAT
Jun 06, 2023 12:09AM ET
Yes sir
0
0
Quotes
All Instrument Types
- All Instrument Types
- Indices
- Equities
- ETFs
- Funds
- Commodities
- Currencies
- Crypto
- Bonds
- Certificates
Please try another search
💎 Access the Market Tools Trusted by Thousands of Investors Get Started
Can Bulls Achieve Escape Velocity?
www.investing.com/analysis/can-bulls-achieve-escape-velocity-200638704
Can Bulls Achieve Escape Velocity?
By Michael Kramer | Jun 05, 2023 03:34AM ET The S&P 500 moved above the resistance zone I have been watching at 4,200 to 4,225. No breakout is complete unless it is confirmed, and for that to happen, you don’t want to see the index slip back below 4,225. I have doubts about last Friday’s rally for several reasons, but the biggest reason is the volatility crush that sent the index higher, as VIX tagged its lowest in nearly two years.
You have to wonder, though, how much more downside is left in the VIX, with most of the gamma now at higher levels and the most likely pain trade for the VIX index is higher.
Meanwhile, we have seen the SKEW index rocket higher, and that is likely due to traders buying out of the money volatility to protect their short volatility positions. This was seen in 2021, as the Fed pumped in tons of QE and acted as a market volatility damper.
This same trade emerged in mid-March, as the Fed expanded its balance sheet by giving banks loans and increasing reserve balance. The debt ceiling limit allowed reserve balances to stay elevated, which allowed this trade to continue. But now, the TGA will start to be refilled this week.
If the money in the reverse repo facility stays unchanged, reserve balances are going to start to drop quickly, and that liquidity that has helped dampen volatility is going to be over with, which could result in a further unwind of this trade.
This period reminds me of January 2018, when we saw a massive blow-off top on the indexes and a very sharp drawdown. In an article I wrote on January 29, 2018, I noted that the S&P 500, Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOGL) had all seen their stocks advance dramatically, and RSIs were well over 80.
Today isn't dissimilar; while the RSIs aren’t as high, their stocks and index trade with RSIs well over 70 and hitting their upper Bollinger bands on the daily and weekly charts. The Nasdaq 100 has been trading above its upper Bollinger band on the weekly chart for two weeks and has an RSI of over 70.
Apple (NASDAQ:AAPL) is trading over its upper Bollinger Band on the daily chart with an RSI over 70.
And Amazon is trading at its upper Bollinger band, with an RSI of over 70.
Meta Platforms (NASDAQ:META) is trading at its upper Bollinger band with an RSI of over 80.
Tesla (NASDAQ:TSLA) is trading at its upper Bollinger band with an RSI above 70.
Meanwhile, the XLK trades at its upper Bollinger band and RSI over 70.
Sure, these are conditions, and conditions can grow even more over-bought. But these aren’t the type of conditions that one generally wants to see when the market is trying to advance after a long consolidation on the S&P 500, especially when it comes from the biggest stocks in the index. Because it means a lot of energy and buying power has already been spent.
Additionally, there has been a big grab for calls in this market, and that is most noticeable in how IV for calls on the S&P 500 holds up much better than the IV for puts when looking at the SKEW for the S&P 500 across strike prices for the June OPEX.
This market has become extremely overbought the undersurface, and I am skeptical that the Friday rally can last.
Related Articles
5 Top-Performing Stocks Outside the S&P 500 With Impressive Earnings
By Ismael De La Cruz - Oct 04, 2023
Although it is a classic to invest in stocks that are part of the index S&P 500, there is much more life outside of it It should be noted that not all large-cap companies are...
Why Bears Should Be Taking Profits at This Point: What to Expect Next
By Jani Ziedins - Oct 04, 2023
6
The S&P 500 finished Tuesday’s session sharply lower as the bond market’s outlook dims. This isn’t the trade I’ve been waiting for. Luckily, my trading plan is keeping me on the...
Rare Utilities Breakdown Deepens Concerns of Recession Ahead
By Chris Kimble - Oct 04, 2023
In early September, we warned readers that Utilities were breaking down and that this would have an adverse effect on the stock market. Since then, the breakdown has become more...
Can Bulls Achieve Escape Velocity?
Comments (7)
Sigma Leo
Jun 05, 2023 11:10PM ET
All this 🤡 does is cook up some charts and come up with theory to short only to find himself as buffoon.
2
2
Sigma Leo
Jun 05, 2023 11:09PM ET
This 🤡 was shorting from 3600 and is wrong 100% of the time. it can go down a bit, doesn't mean bear market.
2
3
MBA BC
Jun 05, 2023 10:09AM ET
still up over 90% over the last 5 years, some of us dont care about short term price movements
1
0
Petet Larkar
Jun 05, 2023 7:15AM ET
this guy is a joke.. he is literally never righ!
9
1
Mr Doodl
Jun 05, 2023 5:58AM ET
The author must feel ashamed for missing this rally.
3
2
Ross Dre
Jun 05, 2023 5:29AM ET
The usual naysayers will come out in force to roast away. But this thinking, again, is on point. S&P, on a daily timeframe, is actually at really big horizontal resistance with it’s h&s-esque breakdown that started the onslaught….. can a $3k apple VR headset unveil uncork this resistance and take markets back to ATH’s?? Maybe if they mention how they are an AI robotics company at their presentation like all the rest of the companies -NVDA, TSLA, etc…<sarcasm>.
5
2
Peter ONeill
Jun 05, 2023 5:29AM ET
Unemployment is at 50 year lows and inflation will stay sticky in the 4%-5% range (well above 2% Fed targets). US credit card debt at $1 Trillion, US National Debt at $32 Trillion and US Corp debt also at 40 year highs. OPEC reducing production by 1 million barrels a day combined with still very tight labour = ZERO chance will the fed cut this year - which is what is currently priced into markets. Apple is already trading at a PE Ratio of 31 versus a 20 year long term average of 16 .....any upside is already included in the price and if you buy now - get ready to lose 50% of your money come Q4 or early 2024 when the market has to recorrect as right now it is about 30% overvalued esp in tech as they still think the fed will be cutting by Q3 (only reason the fed will be cutting is if in a major recession - which in itself will cut the stock market).
5
1
Add Chart to Comment
Confirm Block
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
Report this comment
I feel that this comment is:
Comment flagged
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.