Back to the trading range

VIX is poised to explode next week!

This was what I told you based on my crystal ball. Well, my crystal ball again has not let me down. It shot up 20% today! With that, the market plunged with S&P 500 not only has wiped out the past two weeks' gain, it has lost its support at the 6080 level, then 6050. That opens the door to a move towards the bottom of the recent trading range at 6000. SPX went down as low as 6008, close enough to the next major support at 6000. As shown in the chart below, SPX closed right at its 50 DMA around 6010. 

So what will happen next week? Well, today's drastic volatility is a bit hard to read into it since it is options expiration day – where anything goes. So, I’m not sure how much credibility to assign to today’s move. While no guarantee, stocks often reverse whatever happens on expiration day the following Monday. Per my crystal ball, the VIX is approaching its upper Bollinger Band. A close above the band at 18.29 or so will create the potential for a broad stock market buy signal when the VIX closes back inside the bands. VIX closed at 18.21 today. So it has not yet triggered an extreme oversold condition. The VIX call/put option ratio is showing some premium in favor of the puts in the next two weeks. Taking all together, SPX may likely at an inflection point, close to the bottom of this correction, if not yet there. Maybe SPX 6000 is still the lower end of the trading range. If we do see a rally attempt next Monday, don't be surprised but don't chase it as well. The breakout this week is apparently a fake one and we will continue to see more volatile market movements in the days ahead.

 

 

Before I'm done today, let me share some wisdom about the current situation regarding what President Trump and DOGE head Musk are doing:

Every time a government program is enacted, a little freedom is lost. A minarchist state ensures that the government does only what is necessary—protecting citizens from violence and fraud—without interfering in their economic and personal choices. It encourages personal responsibility, economic freedom, and voluntary cooperation. In short, it creates the conditions for prosperity.

If history has taught us anything, it’s that big government is the enemy of progress. The solution? Cut it down. If we want a freer, more prosperous, and more innovative world, we must embrace a government that does less, not more.

Trump must continue to starve the beast. Elon, grab the chainsaws!    -- Sean Ring