T3’s Take 3: Volatility Returns for a Small Bear Victory

1) Volatility Returns!

Volatility finally returned as stocks finally showed some signs of weakness following the past month’s upward grind.

The S&P 500 fell -0.6% to 2178.15, making today 27 days without a 1% move.

However, we saw relative weakness in tech, biotechnology (IBB), andsmall caps (IWM), which have led the market up since the 6/24 Brexit dip.

This indicates that traders are entering profit-taking mode, which is introducing volatility back into the equation.

The VIX rose 6.6% to 12.59, putting it 14% above last week’s low of 11.02.

We also saw a significant increase in put-call ratios today, which means more traders betting against the market.

And with tomorrow’s crude oil inventory report and the release of the FOMC Minutes, we may see even more volatility.

2) Crude Oil Booms, but Will It Last?

Crude oil hit a fresh high of $46.62 today as the US dollar fell amid ongoing speculation that OPEC may freeze or cut output at its September meeting.

This is a repeat of oil’s run higher into the June OPEC meeting, which did not result in any policy changes.

Shortly thereafter, crude oil topped out before dropping to a $39.19 low on August 3.

Given that crude oil inventories have been rising in recent weeks, it seems that traders are once again pricing in OPEC taking action to support prices.

So in all likelihood, the oil rally will get derailed if OPEC does not deliver the goods.

3) Is Twilio a Short?

Internet infrastructure play Twilio (TWLO) is one of the hottest stocks in the market, having nearly tripled off the June lows.

This has many traders thinking it’s time to short the stock.

However, not only is short interest in Twilio very high, but options traders have been placing massive bearish bets on the stock.

This implies that Twilio is a very crowded short, which could cause a squeeze higher.

You can read my thoughts on Twilio in more detail by clicking here.

Wednesday’s Trading Calendar

US Economics (Time Zone: EDT)

07:00 MBA Mortgage Applications (8/12): prior 7.10%
10:30 DOE U.S. Crude Oil Inventories (8/12): exp. 950k, prior 1055k
10:30 DOE Cushing OK Crude Inventory (8/12): exp. 500k, prior 1163k
10:30 DOE U.S. Gasoline Inventories (8/12): exp. -1700k, prior -2807k
10:30 DOE U.S. Distillate Inventory (8/12): exp. -600k, prior -1959k
10:30 DOE U.S. Refinery Utilization (8/12): exp. -0.60%, prior -1.10%
10:30 DOE Crude Oil Implied Demand (8/12): prior 16698
10:30 DOE Gasoline Implied Demand (8/12): prior 10223.3
10:30 DOE Distillate Implied Demand (8/12): prior 5202.9
13:00 U.S. Fed President James Bullard Speaks in St. Louis    
14:00 U.S. Fed Releases Minutes from July 26-27 FOMC Meeting    
14:00 FOMC Meeting Minutes (7/27)   

Global Economics

04:30 GBP Average Earnings Index 
04:30 GBP Claimant Count Change
21:30 AUD Unemployment Rate

Earnings

Before Open:

American Eagle Outfitters (AEO)
JA Solar Holdings (JASO)

After Close:

Cisco Systems (CSCO)
L Brands (LB)