If you did not get a chance to read my blog on the 1960s from June 2nd, please consider doing so.
Just when the market is hitting euphoric conditions, any expansion of the protests, violence or the number of COVID-19 cases could unravel the market quickly. The Volatility Index, VIX, is sitting just above the 200-DMA. What I am watching for is a 60+ day reversal in that instrument. That would serve as an early warning sign.
You might also consider going back and reading my May 10th blog on why the bullish dollar theory is flawed. Now that the dollar has fallen precipitously since then, those 10 reasons I state continue to age well. In particular, Reason 2: “rising unrest to the point of calls for a civil war and perhaps revolution, in the US and globally, including China,” resonates right now.
Hence, for precaution, we look at the volatility index.
The green line is the 200-DMA that comes in at 24.47. The ideal situation would be either a new low under or around the 200-DMA, then a reversal in price, with a rally to close near an intraday high. Then, we would have a good risk to a low established near the 200-DMA. Plus, notice that the gap up from mid-February remains intact.
Regardless, the price of VIX currently is well underperforming the SPY. Additionally, the momentum is declining showing no divergence between current price and real motion. I believe we are heading into a buy zone in the VIX. It will just be a matter of the best setup from here.
And of course, watch the Economic Modern Family. If they rock, the fear continues to elude.
Check out my 2 short commentaries on 2 different Chinese TV stations:
https://www.meigutv.com/en/category/wall-street-today/
- S&P 500 (SPY): Gap up, so now 309.94 should hold if good. 313 resistance
- Russell 2000 (IWM): 140 is pivotal. 147.25 big resistance
- Dow (DIA): 263.20 resistance with 260 support
- Nasdaq (QQQ): I hope you played those all-time high cards. 237.47 matched exactly
- KRE (Regional Banks): 41.34 resistance, 40 pivotal, 35 must hold
- SMH (Semiconductors): 144.96 – the gap got filled, now support
- IYT (Transportation): 164 must hold
- IBB (Biotechnology): Until it takes out 136, noise
- XRT (Retail): 43.50 resistance, 40.70 support
Mish Schneider
MarketGauge.com
Director of Trading Research and Education