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.
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.
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.
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.
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.
Housing Index
The Housing Index, HGX, fell nearly 3.4% and is now very close to dropping below its pre-pandemic high.
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.
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.
NASDAQ 100 ETF
The Invesco QQQ Trust (QQQ) might as well fill that gap between $274 and $282.
Apple
Apple (NASDAQ:AAPL) has broken support and is probably on its way to $140ish.
Tesla
I have some support for Tesla (NASDAQ:TSLA) around $730ish, but there is no reason this can’t go back to the $630s.
Shopify
A day isn’t complete if Shopify (NYSE:SHOP) doesn’t fall by 5%, and it looks like $285ish is coming.
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.
