7 Monster Stock Market Predictions: Volatility Makes Its Move
Michael Kramer | Sep 27, 2021 12:56AM ET
Stocks finished the week of Sept. 24, higher by around 50 bps, after starting the week down by nearly 2%. As previously discussed, much of the rebound was driven by a push lower in implied volatility, as noted by the sharp decline in the VIX on Wednesday and Thursday. Friday proved to be a different outcome, with the S&P 500 rising just 15 bps once the VIX returned to lower levels.
Friday’s price action seems to have confirmed that the sharp rally was nothing more than a reflexive trade due to the fast nature and movement of the volatility in the market. With the VIX back to where it started, I would be surprised if the strong buying witnessed last week sticks around. I explained it all in this YouTube video recorded Friday morning.
The recent rebound in the market at this point was a 61.8% retracement on both the S&P 500 cash and the S&P 500 futures. If it is the case, then the move higher was nothing more than a corrective wave in an otherwise downtrend. It would tell us that another leg lower is coming with a likely retest of the Sept. 20 lows.
The dollar index looks like it is getting ready to break higher. It would not be surprising considering non-commercials and non-reportables are buying the futures contract and have their most prominent net long positions in forever.
Get The News You Want
Micron Technology (NASDAQ:MU) will report this week, and I have been relatively bearish on it now for a few months. DRAM prices have been falling more recently, and there had been a massive put buyer of the September $75 strike price a few weeks ago. It looks like they rolled out of those and into the October ones, based on the changes in open interest.
You can see the triangle pattern that has formed, which is a sign of consolidation, but generally, these patterns will break in the direction of the trend, which has been firmly lower. Volume has been nothing special either, which tells us that buyers are still hesitant to step into the stock even at these reduced levels. There is probably one more leg lower left, with the potential for the stock to fall to that $58 to $60 range.
Caterpillar (NYSE:CAT) shares have made a lower low on the price and a higher low on the RSI. That is typically a good indication that a bottoming process is in the works. It doesn’t mean the stock can’t go a little lower still, but at least for now, that is a positive sign. A lot will depend on what happens when the stock gets to resistance at $199. If it can’t break above that level, it stands a good chance of getting back to $210.
It doesn’t look good for Nike (NYSE:NKE) here, gapping below support at $150 while closing below it on extreme volume. I’m hesitant to say it will fall to $133 because it is so oversold now, but the stock can’t get above $151 over the next few days; the odds of a drop to $133 increase dramatically.
Facebook (NASDAQ:FB) broke the uptrend last week, and now the stock is oversold. Perhaps it rebounds back to $365 over the very near term. But once a significant uptrend breaks like this one has, it is generally not a positive sign.
Original Post
/h2
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.