Scott Burrill - Market Notes

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Scott's Market Notes

It's not That Simple

Apr 27, 2020

In normal times, this upcoming week would be one of the most catalyst-driven weeks of the year. We have on tap major economic releases, significant earnings releases, and an FOMC meeting followed by Chair Powell's press conference. Yet, these are not normal times, and adverse conditions are old news, so hints from Chair Powell about another Fed intervention or additional stimulus will be closely watched, as well as any clue as to the prospects for key company's reporting this week.

For the last ten trading days, the S&P 500 Index has been balancing despite lousy news within a 174 point range of 2711 - 2885, coiling energy for its next sustained move. Both the S&P 500 options and VIX futures term structures are sending mixed signals that will resolve itself with either option volatility continuing to contract or volatility futures trading higher, which means we breakout or we breakdown.

The catalyst will likely be how quickly the states re-open their economies and normalcy returns.

Of course, it's not that simple.

Just the new normal of grocery shopping, masked-up, socially-distanced, and gated, staggered entries into the market is nothing short of a dreadful experience.

The prospect of going back to normal (January 2020) by flipping a switch is nothing short of fantasy, where so much of our previous consumptive activity seems irrelevant.

Looking forward, the S&P 500 Weekly Option Implied Move is + / - 95 points, or a range of 2932 to 2740, or 30% implied volatility.

The Weekly Trend remains down, while the bias is up, suggesting pullbacks are buyable.

Updated Index, Commodity, and Treasury Levels.

Have a great week.

All the best,

Scott

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