More All-Time Highs, More Yawns!
1) Another Day, Another Yawn!
US markets put in yet another astoundingly boring session, and I’m trying as hard as ever to put an interesting spin on these August doldrums.
The S&P 500 and Nasdaq Composite notched new all-time highs shortly after the open, but the action quickly turned to yet another yawn-fest.
The S&P rose +0.04% to 2181.74, which means we’ve now gone 22 days without a 1% move in the index.
Year-to-date prior to this astoundingly boring stretch, the S&P moved 1% on about 1 of every 3 trading days.
Crude oil gave up an early gain to sink back below $43, which had traders selling energy stocks.
Meanwhile, bonds and gold picked up a little steam following their recent Fed-driven selloffs.
2) A VIX Explosion on the Way?
Over the past week, I’ve written extensively that I thought the VIX was set to drop below 11.
But after analysis of historical market data, I decided to take a long position in VIX calls just as the S&P 500 was making its latest all-time high this morning.
This is not a low-risk trade by any stretch of the imagination since the VIX can stay low for extended periods of time.
But prolonged bouts of low market volatility – like the one we’re going through now – are sometimes followed by explosions in the VIX, which could mean profits on VIX calls.
Plus today, Bloomberg reported that net short positions on CBOE VIX futures are the biggest they’ve been since 2013.
That means that traders are betting aggressively that the VIX will drop from here.
Now may be the time to take the other side of the trade, so I stepped up and put my money where my mouth is.
3) The Importance of SPX 2174
This morning, T3 Live’s Jeff Cooper commented on the important of SPX 2174:
An hourly SPX shows a breakout above a flat line that started on our key July 20 date from our key 2174 level.
The index is pulling back from record highs this morning and testing its 20 period m.a., a break of which could elicit a test of 2174ish.
If 2174 is lost, it could signal a Bull Trap being sprung.
Follow through will be key here… in either direction now that we are in what is an important anniversary week.
If it looks like we will close below 2174, I will repurchase SPXU before the bell at the market.
Theoretically, it is possible that one more push below last week’s low plays out that stops in its tracks prior to a run for the roses.
This resembles the analogue from 1929.
If we do get a little test of last week’s lows which is followed by a momentum move above 2200, a last ditch rally could be on the table, but let's take one move at a time as the market is not a fine Swiss watch and patterns do not have to play out with precision.
The bottom line: any sell signal here, we must take, and if we get stopped out on a new high, we will know what to look for.
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Today’s Trading Calendar
US Economics (Time Zone: EDT)
07:00 MBA Mortgage Applications (8/5): prior -3.50%
10:00 JOLTS Job Openings (Jun): exp. 5500, prior 5500
10:30 DOE U.S. Crude Oil Inventories (8/5): exp. -1500k, prior 1413k
10:30 DOE Cushing OK Crude Inventory (8/5): exp. -100k, prior -1123k
10:30 DOE U.S. Gasoline Inventories (8/5): exp. -1300k, prior -3262k
10:30 DOE U.S. Distillate Inventory (8/5): exp. 500k, prior 1152k
10:30 DOE U.S. Refinery Utilization (8/5): exp. -0.50%, prior 0.90%
10:30 DOE Crude Oil Implied Demand (8/5): prior 16996
10:30 DOE Gasoline Implied Demand (8/5): prior 10206.4
10:30 DOE Distillate Implied Demand (8/5): prior 4871.4
14:00 Monthly Budget Statement (Jul): exp. -$115.0b, prior -$149.2b
Global Economics
17:00 NZD RBNZ Rate Statement
21:10 NZD RBNZ Gov Wheeler Speaks
Earnings
Before the Open:
Michael Kors (KORS)
Ralph Lauren (RL)
After the Close:
Shake Shack (SHAK)
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