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October 2, 2021
Stocks – MU, F, WMT, TDOC, MRK
Macro – SPY, VIX
- Tactical Update: Fundamental Shifts May Send The Stock Market Even Lower
- RTM- Earnings Revisions Are Beginning To Turn Negative
- Micron May Head Lower Amid Falling Memory Prices
- Stocks Reach An Inflection Point
- RTM – The Global Growth Killer Just Broke Out
- RTM Video: The Market May Not See A Fourth Quarter Rally
- RTM: The Market Is The Middle Of Preparing For A More Hawkish Fed
- RTM – Value May Now Outperform Growth
Stocks rallied to finish the week of October 1, with the S&P 500 rising by 1.15%. The advance on Friday coincidences with a volatility crush, with the VIX, fell by 8.6% to finish at 21.1 on Friday. The S&P 500 also had a relatively soft finish despite a huge buy imbalance at the end of the day, dropping nearly 50 bps from the day’s peak in the final hour. It would suggest to me that the rally was a volatility-induced short-covering event into the weekend.
Like in our example from last week, once the VIX bottomed and started to move higher, the buying in the S&P 500 reversed.
I have found it interesting that each time the VIX spikes and retreats, it corresponds to the S&P 500 making a lower high. For example, on September 10, the VIX closed at 21 and the S&P 500 at 4,458. On September 17, when the VIX was 21, the S&P 500 was at 4,432. On September 22, the VIX was at 21, and the S&P 500 was at 4,395. Now on October 1, the VIX was at 21, and the S&P 500 was at 4,357.
It tells us that there is not much, if any, fear in this market currently. Given that, it seems hard to argue that a bottom is in place, especially when the rallies have been implied volatility induced.
Nearly the same thing happened with the VIX in 2018, with the S&P 500 making new lows while the VIX made lower highs. It wasn’t until the final leg lower that ultimately pushed the VIX higher, concluding the decline.
S&P 500 (SPY)
The S&P 500 futures fell sharply on September 30 once the bear flag broke. Most interestingly, the rally on October 1 seemed to be a retest of that break lower, with the future reaching and touching the base of the flag and then reversing lower. We should see a retest of the 4,300 early this week, with a break lower towards 4,225.
Micron is about ready to take its next step lower. There are reports from Digitimes that indicate memory chip prices are heading lower, and that can’t be good for Micron. Couple that with some bearish options bet last week, and all it will take is a drop below support at $70 to get this rolling lower to $58. I got into more detail in my member’s area, which you can try for the first 2-weeks for free. RTM Exclusive: Micron May Head Lower Amid Falling Memory Prices
Merck turned out to work well, with that positive data that came for its Covid treatment pill on Friday. The stock surged more than 8%, rising to a high of just over $84. The options traders did an excellent job with this one. I wrote this last story on September 13 – RTM Exclusive – More Call Buying In Merck
Ford has surged, much to my surprise. It just didn’t work out the way I expected it. So I gave up on this one falling. I had noted at the end of August that I thought it could drop below $12. I suppose it could rise to around $15.
Teladoc continues to push lower, and I’m still waiting for this one to fall to around $114. From September 20 – RTM Exclusive: Teladoc’s Stock Is Ready To Unravel
Walmart looks oversold at this point. I don’t think it has bottomed yet, but that doesn’t mean it can’t have a bounce higher over the very short term. The most logical place to bounce, too, is back to $142.
Good luck this week
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