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Stocks Rips Higher On September 23 As Volatility Gets Crushed

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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September 23, 2021

Stocks – NKE, GE, F

Macro – SPY, VIX, DJT

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Stocks ripped higher on Thursday with the Bull back in control. Never mind FedEx’s miserable quarter, forget the weaker than expected flash PMI–with a horrible commentary, forget about Nikes miss on revenues and weaker than expected guidance. Everything is great! At least, that is what I heard from the people on TV today.

The reason the market rose today is simple: implied volatility was crushed, AKA the VIX dropping like a stone. The VIX ripped higher on Friday of last week and Monday of this week. Now that two event risks have been “apparently” removed, the volatility sellers are back, pushing the VIX down and pushing stocks up.

You can see the shift in the term structure from Monday till today. It was a massive move lower in the spot market.

The significant drop erased all of the gains the VIX has seen since September 16.

S&P 500 (SPY)

Interestingly, the S&P 500 did not get back to its closing level on September 16, as the VIX did. If the S&P 500 rips again tomorrow, maybe we can talk about retesting the highs and saying everything is fine and dandy. The market was oversold, and the VIX was overbid on Monday, so, unfortunately, we get these reflexive trades that are equally as violent.

Interestingly, the S&P 500 closed right on the 61.8% retracement level of the move down from September 3 until Monday’s bottom. Additionally, it closed right on the downtrend. The same downtrend which I mentioned in yesterday’s commentary. So from my vantage point, it would seem that we could merely be in a corrective wave higher, in another wise longer-term downtrend.

Dow Jones Transports

The Transport soared today by 1.7%, yep. Right back to resistance at that 200-day moving average and failed. It is only down 12% from its highs.

Nike (NKE)

Nike needs to hold on to this $153 region of the chart, or a massive gap fill is coming. That guidance cut doesn’t look good, whether it is supply-chain related or not.

 

GE (GE)

Wow, I just noticed GE moved up 4%. I missed that today. Maybe that cup and handle pattern will play out, and the stock gets back to $115.

 

Ford (F)

What’s the deal with Ford? One day it looks like it’s on life support; the next day, it seems like it’s going back to $14. This thing does not want to cooperate with me.

 

Anyway, I’m super tired.

Mike

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