Stocks Rise On Predictable Volatility Crush
Michael Kramer | Nov 30, 2021 12:28AM ET
Stocks jumped on Nov. 29 as volatility came down sharply. I noted this was highly likely on Sunday, but the S&P 500 wasn’t able to get up to 4700. Instead, it stalled at 4,675.
The VIX jumped too much on Friday, and this snapback was obvious once we didn’t get a significant drop at the open.
h2 S&P 500/h2The IV crush pushed the S&P 500 higher to 4675, which was a resistance level, and that is where it stopped rising. It was also the 61.8% retracement of what I believe was wave three down; therefore, today’s up move could be the completion of wave 4. Thus, we should start wave five today in the futures, resulting in that drop to support I have looked for at 4530. Let’s see what happens first before we think further out.
There is a broadening wedge right now in the Invesco QQQ Trust (NASDAQ:QQQ)s, and these broadening wedges have been breaking in the direction of the previous move. The broadening wedge going into October was preceded by a rising trend, which led to a breakout. This wedge was proceeded by a down move and should result in a move down to around $383.
All the recent gaps in the iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) have now been filled, except for the lower one. That corresponds nicely to the predicted moves more down in the SPX and QQQ.
The SPDR® S&P Biotech ETF (NYSE:XBI) is close to breaking a significant support level here, $115. It could set up a drop back to $100 over time. It is terrible news for those Russell 2000 fans, too, because many biotech stocks help move the Russell around.
Get The News You Want
Meanwhile, the risk appetite in the market may be ready to take a turn for the worse, based on the ultimate risk-on/risk-off gauge. The biotech (XBI)/Utility (XLU) ratio has a giant reverse Head and Shoulder pattern present and is about to break the neckline, up. It would mean the XBI underperforms XLU; it is probably not a good sign of what’s to come anytime that happens.
Original Post
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.