8/15/22

STOCKS –  NONE – not a symbol 😛

MACRO – SPY, DXY, LQD, TIP, QQQ, VIX

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Markets moved a bit higher, with the S&P 500 closing the gap at 4,300. The RSI is now beyond 72 and is very overbought. With the gap filled, resistance should be strong here. This has been a momentum-driven rally, but the market dynamics start to change for the balance of this week, with a VIX expiration on Wednesday morning and Fed minutes Wednesday afternoon, and options expiration come Friday. There will be a lot of gamma released this week, meaning that market markers will no longer have to buy S&P 500 futures to hedge their books.

Dollar

Additionally, the dollar index had a significant rise today, rising significantly against the Chinese Yuan. The dollar appears to be heading much higher, with the Chinese economy slowing and the PBOC bank cutting rates overnight.

LQD

Additionally, the LQD corporate bond ETF fell today by roughly seven basis points but, more importantly, has stalled out and stopped rising. This last leg higher in the S&P 500 has not been in agreement with the LQD.

TIP

Additionally, the TIP ETF remains stalled out and suggests that the move higher in equity price is not likely to last. It isn’t so much the distance of the spread between the two that matters, but it is the direction that matters, and right now, it is clear they are heading in the opposite directions, and that is where many people will get this wrong.

VIX

Also the VIX was up today a little bit, something you don’t often see on an up day in S&P 500. Again, something worth watching over the next day or two.

I still think we see 3,950 on the SPX over the next couple of weeks.

-Mike

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