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3 Keys To The Stock Market For The Week Of February 12

The week of February 12 will continue to volatile, whether the stock market is going up or going down. The tug of war we saw on Friday, between positive and negative territory will likely continue especially on Monday. But as we wrote yesterday, signs are emerging that a bottom is in the process of being put and place, and there will be some keys to this market that could suggest the worst is over.

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A Line Drawn In The Sand?

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Vol

Volatility will obviously be the key to the market, and the VIX and many of the ETF products will be the critical focus. The chart shows how dangerous the inverse VIX ETF products are, below is the SVXY, which has been destroyed.  But more important than prices, we want to see the volume continue to fall back to normal levels.

Here in lies the problem too, and I am shocked when I see products where you can buy volatility on individual stocks, like the VXAZN, and VXAPL, basically betting that vol will rise on Amazon or Apple, these are nothing more than casino like products, betting on volatility rising. 

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Inflation and Yield Watch

The Consumer Price Index reading is coming out this week, and the street is looking for m/m reading of 0.3 percent, and a y/y rise of 2 percent.  We can see that CPI has traced OIL pretty consistently over the past.

But unfortunately, it also likely means that the inflation reading is likely to come in ahead of expectations. But I will guess that unless it comes in some crazy reading of above 3 percent, I think the market will be calmed, that inflation is not running away, which I don’t think it will do.

For now, over the short-term, if I had to guess, yields are likely done rising for a bit and a retracement back towards 2.6 percent seems in order.

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Stock Watch

Watch the leadership in the stock market from stocks like Apple, Alphabet, and Microsoft. These are the leaders in the market, and when times get rocky one wants to see the leaders lead.

Micron could also be a big one to watch during the week, as the company recently pre-released revenue guidance which was higher than expectations. 

But the market cared not, and if a bounce or even a bounce is attempted, it should be found in companies that continue to beat and raise expectations.

Facebook also has seen its shares fall sharply, and have fallen to levels not seen since the early fall, and for now, have found a meaningful bounce.

The technology ETF (XLK) could also be critical, as that ETF was grossly overbought, and has come down hard. Strength and outperformance would is a big positive.

Good Luck

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Tags: #sp500 #apple #technology #alphabet #micron #facebook #amazon #microsoft #vix #yields #volatilty