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Stocks Jump on April 25, As Implied Volatility Melts

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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4/25/22

STOCKS – ARKK, SHOP

MACRO – SPY, QQQ, VIX

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S&P 500 (SPY)

As noted on Saturday’s post, the Vanna rally arrived late in the day on Monday, and it helped the S&P 500 close higher. The index rose by almost 60 bps after trading down by more than 1% most of the day. The index managed to close just below 4,300, and I think there is a possibility that the index will advance a bit further to around 4,330 to 4,340. But I doubt this rally is sustainable.

VOL (VIX)

The VIX got too high today, crossing above 31, which is not sustainable when the S&P 500 is down 1%. It is no surprise that the VIX imploded late in the date to close around 27. Could the VIX go back to 24? Yes. Could it go back to 20? Doubtful. The risks going into the FOMC meeting are too high, and traders will need to buy protection heading into that meeting.

Rates

There was a lot happening today, and most of it centered around China and its slowing growth. That sent nominal bond yields lower, but real yields rose some. So the fact that the NASDAQ rallied made no sense from a fundamental standpoint and should have given you a clue as to the rally’s sustainability.

ARKK (ARKK)

The ARKK ETF rose around 3% today, but I guess it was due after falling 11% last week. The ETF moved back to resistance around $54.35 and nothing else. It seems like a dead cat bounce.

Shopify (SHOP)

Despite the ARKK ETF and the QQQ ETF being up, Shopify finished flat, surprising. There is still another shoe to drop here, given the declining RSI.

That is going to be all; it is getting late.

Mike

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