The VIX Gets Crushed Fueling The Stock Market's Advance
Michael Kramer | Aug 04, 2021 01:23AM ET
The S&P 500 rebounded Tuesday, rising 80 bps to a new closing high. The index started lower but managed to find some buying after Europe closed around 11:30. It came in a rather big wave, which looked like several buy programs, based on the nature of the advance. There was no news to push it either. The index did close shy of the intraday high at 4430.
Today will be the ADP job report and ISM Services index. The ADP report has not been a reliable indicator of late when it comes to predicting the BLS job report, but then again, nothing has been. I’m more curious to see if the ISM index indicates the same overall slowing trend the manufacturing PMI showed.
Tuesday's rally seemed to have more to do with a VIX moving lower than because of positive market sentiment. Nothing changed overnight; even yields were flat, as was the dollar.
There was no reason for the reflation sector to rally; the rally reflected broad-based index buying, which takes everything up with it. The VIX fell to 18, and with implied volatility falling, it provides the fuel needed for that index buying. There is a slight uptrend to the VIX, and it would not be surprising to see the VIX start pushing higher today.
The 10-year finished the day at 1.17%; it continues to look as if rates want to head to lower levels.
The Financial Select Sector SPDR® Fund (NYSE:XLF) was sitting on resistance at $37. If it can break that resistance zone, it could easily move back to the prior highs. Absent yields rising; I don’t see how the XLF breaks higher or why it would.
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Wells Fargo (NYSE:WFC) appeared to be the best positioned of the financials to rise, at least based on the chart. It is the most similar to the ETF. It, too, is at resistance around $47. A push above $47 probably opens a path for the stock to climb to $49ish.
Snowflake (NYSE:SNOW) had a strong day, finally clearing the resistance level we had been watching for a few weeks at $285. If the market stays healthy, it probably does have a good shot at moving up to $325.
The Healthcare sector had a strong day today, with UnitedHealth Group (NYSE:UNH) jumping back to its all-time highs. The $420 price range has been trouble for United for some time now. The pattern looks similar to the one that was seen in November and January. If it gets over $420, it could have some distance to climb.
Cisco Systems (NASDAQ:CSCO) had a nice move up too. This is another stock breaking free of its recent range, and it appears to be shifting from bearish to bullish momentum. The stock probably has some further room to climb, possibly to around $58.
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