U.S. Stock Market Volatility Picks Up, VIX Now Above 31
Known as the “fear gauge,” the CBOE Volatility Index (VIX) measures activity in the S&P 500 options market. Currently, the VIX is back above 31, its highest level since October of last year. The turbulence is being attributed to a supposed ongoing battle between “Reddit traders” and traditional hedge funds. No matter what is going on, stocks are down big today. At the halfway point of the Wall Street session, the DJIA DOW (-600), S&P 500 SPX (-76), and NASDAQ (-285) are deep into the red.
This morning has brought a slew of metrics facing the U.S. market. Here are the highlights:
Event Actual Projected Previous
Personal Income (Dec.) 0.6% 0.1% -1.3%
PCE Price Index (MoM, Dec.) 0.4% NA 0.0%
Chicago PMI (Jan.) 63.8 58.5 59.5
Michigan Consumer Sentiment (Jan.) 79.0 79.2 80.7
All in all, this group of figures is relatively solid. Prices are up, as is Personal Income and the Chicago PMI. However, the UM Consumer Sentiment Index is down, suggesting that people are apprehensive about the US economy. Given the contradiction, it’s unlikely that today’s selloff is a product of these figures.
Right now, the VIX is on the rise. As a general rule, this means that stocks are likely to keep falling.
VIX At Highest Levels Since October
Last March, the VIX reached highs above 80 for the first time in a decade. Now, values are trending higher and March E-mini S&P 500 futures are headed south.
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Here are two levels worth watching in this market:
- Resistance(1): Spike High, 3862.25
- Support(1): 38% Current Wave, 3615.50
Bottom Line: If the VIX continues to rise, there may be a buying opportunity in the March E-mini S&P 500. As long as the Spike High remains intact (3862.25), I’ll have buy orders in the queue from 3620.25. With an initial stop loss at 3598.25, this trade produces 88 ticks on a standard 1:1 risk vs reward ratio.
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