Sorry for the silence, but I have been traveling and on vacation.
Yesterday was my first day back.
The real was certainly not surprising given the extreme breadth readings over multiple days (New Highs versus New Lows) on a composite which means smart money is selling out near the highs.
The markets were merely awaiting a catalyst. What always is surprising is the violence of the moves once Volatility is ignited.
With VVIX at 135, it has done its job of warning of the sentiment and fear.
The VIX Term Structure is inverted. Notably at the 42 day mark versus 160 day. This means risk is greater in the short term than the long term. Highly unusual.
So, now what?
Levels provide context of mathematical proximity and order flow (ILR, Spinach, etc.)provide us with what the players are doing.
Given the fact the SP1500 is nearly 90% below its 20D Bollinger Band, a bounce is likely,particularly with Volatility so pronounced. That said, we are well below theWeekly Magnet of 2904 and the yearly VWAP.
Rallies likely will be faded, but opportunities abound depending on the client duration.
A thesis could be written on Bonds, but rates are likely to compress. Several months ago, calcs revealed a key level to watch, apart from the shape of the yield curve was 3.38%.
Heavy eco numbers with CPI, EIA Oil, Bond Auction and Fedspeak before Banks kickoff earnings season tomorrow morning.
Bias is UP.
All the best,