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Stocks Tank With No Bottom In Sight

By Michael KramerStock MarketsMay 12, 2022 01:52AM ET
www.investing.com/analysis/stocks-tank-with-no-bottom-in-sight-200624026
Stocks Tank With No Bottom In Sight
By Michael Kramer   |  May 12, 2022 01:52AM ET
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It was another bloodbath in the stock market, with the S&P 500 dropping by 1.6% and the Qs down by almost 3%. I almost even forgot there was a CPI print on Wednesday.

As I said the other day, it is hard for me to say we oversold. However, we are closer, with the S&P 500 RSI now at 31.6 and the index sitting on the lower Bollinger® Band. I would like to see the S&P 500 undercut the RSI reading of 24 in February.

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

Even more interesting is that despite the sharp decline, the VIX finished down on the day at 32.5. It tells me there was “real” selling in the market yesterday, and the drop wasn’t due to investors buying puts and market makers hedging with shorting futures.

If you live long enough, you see these same things play out time after time, and something similar happened in 2018 between the S&P 500 and the VIX.

I remember it very well because I recall even writing about it. From October until the middle of December 2018, the VIX was range-bound, moving back and forth between 16 and 25. Finally, in December, the VIX just exploded and ran up to 36.

VIX Daily Chart
VIX Daily Chart

Since January 2022, the VIX has been trading sideways, in a more significant range of 20 to 36. I think this will resolve with a considerable spike in the VIX, probably something north of 40, maybe even as high as 50, as maximum fear sets in.

VIX Daily Chart
VIX Daily Chart

Put-To-Call

The put-to-call ratio confirms that fear is not high enough, settling at 1.16. It needs to close above that 1.35 level to even think about a bottom.

Put-To-Call Ratio Chart
Put-To-Call Ratio Chart

Biotech ETF

The SPDR® S&P Biotech ETF (NYSE:XBI) fell 7.25% yesterday and is now trading at levels not seen since 2017. It is hard to find a bottom if this is still dropping like a stone.

XBI Daily Chart
XBI Daily Chart

Housing Index

The Housing Index, HGX, fell nearly 3.4% and is now very close to dropping below its pre-pandemic high.

HGX Daily Chart
HGX Daily Chart

S&P 500

The other problem is that Apple (NASDAQ:AAPL) broke yesterday, dropping below support at $152, and now that this one has gone, it probably signifies the next leg lower in the market is beginning.

The S&P 500 consolidated around the 3950 to 4000 level the last two days. That changed yesterday when the index closed at 3935.

SPX 5-Minute Chart
SPX 5-Minute Chart

There is another layer of support at 3,860, which doesn’t appear to be very strong, which indicates we could fall as far as 3,710ish.

SPX 1-Hr Chart
SPX 1-Hr Chart

NASDAQ 100 ETF

The Invesco QQQ Trust (QQQ) might as well fill that gap between $274 and $282.

QQQ Daily Chart
QQQ Daily Chart

Apple

Apple (NASDAQ:AAPL) has broken support and is probably on its way to $140ish.

Apple Daily Chart
Apple Daily Chart

Tesla

I have some support for Tesla (NASDAQ:TSLA) around $730ish, but there is no reason this can’t go back to the $630s.

Tesla Daily Chart
Tesla Daily Chart

Shopify

A day isn’t complete if Shopify (NYSE:SHOP) doesn’t fall by 5%, and it looks like $285ish is coming.

Shopify Daily Chart
Shopify Daily Chart

NVIDIA

NVIDIA (NASDAQ:NVDA) keeps dropping, and it is scary because this traded for $78 before the pandemic. It may not reach $78 soon, but the $115s seems possible.

NVIDIA Daily Chart
NVIDIA Daily Chart

Original Post

Stocks Tank With No Bottom In Sight
 

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Stocks Tank With No Bottom In Sight

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Comments (6)
Md Omar faruk
Md Omar faruk May 14, 2022 4:41PM ET
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nic
Jeff Page
Jeff Page May 12, 2022 10:45AM ET
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Gravity and momentum always wins!
Al Ose
Al Ose May 12, 2022 6:23AM ET
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Thanks for the perspective
Alan Butterfield
Alan Butterfield May 12, 2022 5:00AM ET
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Gap on the chart at 2300 march 23 2020. Can it fill that low?
Gokhan Aksoy
Gokhan Aksoy May 12, 2022 4:42AM ET
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Thanks 👍🏻
Pon Mariappan
Pon Mariappan May 12, 2022 4:25AM ET
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Nice one …
 
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