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Stocks Little Changed But A Turnaround May Be Near

By Michael KramerStock MarketsJun 30, 2021 12:42AM ET
www.investing.com/analysis/stocks-little-changed-but-a-turnaround-may-be-near-200588979
Stocks Little Changed But A Turnaround May Be Near
By Michael Kramer   |  Jun 30, 2021 12:42AM ET
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Stocks finished the day little changed, with the S&P 500 index up higher by roughly 3 bps. The rotation seemed to be in perfect alignment again today as the technology sector had risen just enough to keep the declines in the reflation trade from pulling the index down.

If we take that one step further, we could say, Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) kept the S&P 500 in the green. Without those two, the index would have likely been down about 10 to 15 bps on the day.

Volatility levels are rising on the index and single stock level, indicating a turn lower is likely on the way.

Strength Is Being Sold

Despite the calm on the surface, what is happening underneath the surface is really amazing. Strength is being sold, especially in the reflation assets. It tells us how much the mood of the market may have changed in recent weeks. Sectors like the financial and housing started the day higher and were hammered and finishing off their highs.

Dow Jones Transportation Index Chart
Dow Jones Transportation Index Chart

Volatility

Additionally, we have again seen the VIX and VXN creep higher despite overall markets moving higher. It is highly unusual for this to happen, and in the past, this price action has preceded a sharp move lower in the equity markets. The rising volatility indexes suggest that investors are looking for protection, i.e., puts.

Why shouldn’t traders/investors buy protection ahead of the ISM and BLS Job report? The ISM manufacturing report will come on Thursday, with the BLS Job report on Friday.

VIX Daily Chart
VIX Daily Chart

S&P 500

I am still sticking with the idea that we have a wave “C” in the S&P 500 coming, which should result in a pullback to 4,120, based on the S&P 500 future hourly chart.

S&P 500 Futures Hourly Chart
S&P 500 Futures Hourly Chart

The advance/decline traded lower today, not confirming the move higher in the S&P 500 nor the recent move higher that started last week.

SPX Daily Chart.
SPX Daily Chart.

Meanwhile, the percentage of stocks above their 50-day moving average also fell again, suggesting more momentum in the index has been lost.

S&P 500 Stocks Above 50 Day Average Daily Chart
S&P 500 Stocks Above 50 Day Average Daily Chart

Apple

I know Apple has been rising, and it has surpassed the downtrend I thought might stand in its way. But when we look at the options, we can see the price has been rising on increasing call activity, and now implied volatility is rising. In the past, we have seen this happen when stocks are near the end of recent rallies.

Apple Inc Historical Volume Chart
Apple Inc Historical Volume Chart

AMD

Advanced Micro Devices (NASDAQ:AMD) has also rocketed higher, moving to the upper end of the trading range we have been watching. But again, like Apple, we can see the implied volatility level really moving higher, suggesting this little rally is likely to reverse.

AMD Historical Volume Chart
AMD Historical Volume Chart

Have a good one

Original Post

Stocks Little Changed But A Turnaround May Be Near
 

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Stocks Little Changed But A Turnaround May Be Near

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Kieth Scott
Kieth Scott Jun 30, 2021 5:01AM ET
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