VIX eased down to challenge the weekly short-term support at 20.48 on Thursday. On Friday it bounced to close above its Cycle Top support/resistance at 21.25. Wall Street doesn’t seem to be alarmed.
Wall Street is making peace with the new normal of higher volatility as stocks careen between agonizing sell-offs and sudden rallies.
After the gut-wrenching $2.5 trillion wipeout in the S&P 500 since early October, traders are resting at relative ease as they prep for market bumps down the road.
A measure of expected changes in the CBOE Volatility Index is sitting near its lowest level since 2016 versus the underlying fear gauge, while demand to hedge tail risks is at multi-year lows.
SPX bounced at the neckline, round trips back to where it started
SPX challenged the Head & Shoulders neckline at 2583.23 on Monday, then made a near-50% retracement before losing nearly all of its gains at the close of the week. The sentiment that this action is only a test of the low is fading fast. The Cycles Model still holds out for another week or more of decline.
U.S. stocks closed at their lowest level since April, with Treasuries rising alongside the yen, as mounting concern over the health of the global economy overshadowed positive trade developments and signs of strength from the American consumer.
The S&P 500 Index tumbled 1.9 percent Friday, after testing February lows, erasing the week’s gains. Health-care and technology stocks were among the biggest decliners. The Dow Jones Industrial Average sank almost 500 points, led by Johnson & Johnson's (NYSE:JNJ) biggest rout in years amid mounting legal peril. Retailers retreated even after monthly data indicated U.S. consumers are still spending. Oil and Gold fell.