Dow Jones S&P NASDAQ Bearish With Volatility Spike

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In this current market environment, we have things which are Uncertain and challenging. We have the debt ceiling, we have geopolitical issues, we have an election season coming up very quickly and all of these things. Along with all the other technical analysis we do, at the end of the day we focus on the trends prices. We will therefore try to make sense of all the different competing narratives we can from the market data of S&P, Dow Jones, NASDAQ and others, that we have.

Market Highlights – Dow Jones S&P NASDAQ Small Cap Mid Cap

In our Market Recap we see a bit of a risk-off feel to the tape today and really most of that came right out of the open. On Tue, we had seen a type of decline through the afternoon session but, on Wed markets opened lower and sort of pushed down in the first half hour of trading. From there risk assets never really recovered off of those that initial drop.

Although there was a bit of a bounce in the 3 O’clock hour but, risk assets came back down to earth into the close. That put the S&P for the end of the day right around 4115 and that’s down about 0.75 percent from Tuesday’s close. The NASDAQ Composite outperformed by just a bit, but was also down by 0.6 percent.The Dow was down 0.8 percent, Mid caps and Small Caps was all down as well. In the Small Cap S&P 600, the worst performing of the group was down about 1.3 percent from previous days close.

VIX

We noticed the VIX with a jump of almost 2 at the beginning and this is something we’ve been talking about for quite some time in our Market reports in the past. Market rallying on low volatility is kind of the base case for a bullish argument however, here markets are sold off on increasing volatilities indicates much more of a bearish feel and that’s that risk-off field which we have been always talking about in the markets.

Upon acceleration to the downside, a lot of stocks failing to Eclipse resistance levels and now pulling back from resistance causing volatility to increase and the VIX is right at that 20 point, sore now.

Bonds

Bond Interest rates overall moved to the upside and the entire yield curve sort of Shifted higher. The short end of the yield curve got almost to 5.2 percent and the rest of the curve was up as well. The 10-year yield is currently around 372. 30-year yield pushed closer to that 4 percent level and was currently around 397.

The Dollar Index was up by about 0.30 percent. Therefore, Dollar was stronger and bonds, stocks were weaker on Wed.

Commodity

In the Commodity space we could see red for Gold, Silver and Copper therefore, the base metals and also precious metals all moved to the downside.

GLD was down by another 0.8 percent, Silver was down by another 1.6 percent. It’s an interesting situation with Gold and Silver as these are some of the better performing ones Year-to-Date. Outside of Mega Caps like Communications and Technology stocks, within Gold and Silver there are some pretty decent stocks. However on Wed, these stocks aswell were really feeling some weakness in the short term and this case was very much with the Gold stocks.

Newmont miners like FCX and others were all sort of rotating lower this week and failing to hold Support, drawing in our very much concern.

Oil prices were up a little bit with the Energy sector being the only one finishing the day in the Green.

Cryptocurrency

Cryptocurrencies were all red. Bitcoin and Ethereum and the others in the crypto space were majorly in the red. Bitcoin was down about 3.5 percent, Ether was also about the Same. This drew Ethereum below 1800, Bitcoin remained below 27000. We see that this is an area of the market which had been stronger not too long ago but now its rotating lower. Bitcoin stalled out at 30000 and now again sort of retesting the lower end of the Range.

Sector Performance – Markets Dow Jones S&P NASDAQ

The Energy sector was up another 0.50 percent on Wed.

Energy stocks, is where, we do see some opportunities that could be coming in as it has been one of the worst performing sectors year to date.

This week, as a lot of risk assets came off, it was Energy which actually That had a decent week of it. It was another 0.50 percent higher. for the XLE. After XLE it was Consumer Discretionary that was down 0.30 percent down. The worst performing sector was Real Estate. Financials, Industrials and REITs continued to have a tough stretch and were down another 2 plus percent today.

Market Recap – Dow Jones S&P NASDAQ Small Cap Mid Cap

A brief check-in on the chart of the S&P 500, this week we saw another retest of the February Peak but, so far we have failed.

At the end of April we pushed above that with a shooting star candle and that led to some short-term retracement. Again last week we hit 4200 and we traded above there a couple of days but, kept closing lower and now this week we’re sort of giving away those recent gains and pushing down to the lower end of this range, not too far off of the 50-day moving average. what’s interesting is if we power and if we turn on a dime tomorrow and power above 4200 then we are concerned that we have another big set of resistance levels not too far above that point.

A 61.8 percent retracement from the October 22 low back to the January 22 high, puts us right around 4310.. 4320, which is pretty much right at the August 2022 high. Therefore, we could hope of a further resistance that is a little bit above current levels but, first things first we have to get above S&P 4200. A lot of stocks that have gotten us to this point are pulling back now as well and we could think of stocks like Apple and Microsoft,

Semiconductors and a lot of these Stocks are now sort of pulling back from previous resistance. This could be setting up for that next leg higher but, for now it is very much a risk-off feel to the tape of this week.

The VIX is another one to to talk about. Now we have spiked up to 20 and really come at the beginning of May level. We have mentioned in the past about how volatility was getting lower and lower and the VIX was getting back down in the range that was more like 2021 than 2022.

We had sort of a higher volatility range and regime in 2022. 2021 was much more about a consistent uptrend on Lower volatility and really for the last six months, even though a lot of stocks don’t look like the chart of S&P or the NASDAQ, the S&P and the QQQ are arguably in a nice uptrend overall from October of last year, and the volatility sort of getting back down into that low Volatility range.

What’s happened this week is that we are seeing another spike in the VIX by getting up to 20. Now, what’s interesting is, if we look back over time, when volatility spikes and if it gets above 20, it’s usually more characteristic of a bearish phase than a bullish phase. Stocks don’t just sort of gently move higher on higher volatility, as people panic and they get anxious or as they get nervou, as there’s FOMO, as there is fear of losing everything.,

Consequently, as there is fear motivating investors, volatility tends to spike and that’s usually more descriptive of a bearish phase than a bullish phase. Therefore spike in the VIX would be sort of a negative sign potentially for stocks and something certainly to watch out.

Stock Watch

Nvidia’s earnings after the close was pretty meaningful. This is something certainly to pay attention to. Right now, in the after hours it was down about 0.75 percent. It’s probably a little too early to pass any judgment on what’s happening here with Nvidia but this is definitely a stock to watch and you know through the after hour session and in the trading tomorrow we would argue that this Market overall has felt better than a lot of the individual stocks have looked because of stocks like Nvidia that are so incredibly strong.

For NVIDIA, we find a consistent uptrend above two upward sloping moving averages and the momentum’s strong aswell. With the RSI pretty much the whole time above 50, if the relative strength goes up, and markets start breaking the upside resistance levels then Nvidia will start to look very different.

Netflix is another one of course within this Fang group to watch as well. 375 has been pretty standard resistance in this Market. We had the February highs, and had stocks attempting to retest those Highs. A lot of stocks have failed to Eclipse their February highs. The S&P itself is testing that Peak, around 4200. Netflix is right there as well actually up 2.5 percent on Wed. while most things are are struggling a little bit, can Netflix get above 375?.

Going forward, on the other hand, we have stocks that are testing support. Starbucks is a good example of this as we see the lows from March, we then made a new high for the year at the end of April, gapped lower at the beginning of May, bounced off of the 50-day and now Starbucks is rotating lower yet again. Will a stock like Starbucks hold the March Low…, hold the 50-day moving average..? right around that same level… around 97 97.50 ?.

We are very close to what’s called a Confluence of support, when a level like that holds and this looks like a nice pullback within a consolidation phase. Starbucks looks very different and starts to look like Nike and others that have actually failed to hold support.

looking at Starbucks, we can find a lot of names like this in the consumer space and other sectors as well. They have all started to break down, right coming off of new highs for the year, but breaking support.

In the case of Starbucks, breaking below the 50-day moving average, breaking below a trend line with the lows from the last 12 months and now testing the real support Level. If this holds at the March low, if it holds the 200-day then, things are not getting too bad but, if it pulls a Nike and starts blowing even further to the downside then, this Market can look a lot worse a lot more quickly.

Finally we talk about Nike as an example. This is the danger on the downside of some of the consumer space breaking below support breaking below the 200-day. Crux is another name like that, which is sort of in that similar bucket and we have to watch stocks like these to see how many of them are failing to hold support.