The volatility battle rages on with bulls and bears pushing each other back and forth along the 200-day MA at 16.57 a key bull-bear deciding line. The VIX is currently trading Monday morning in the States, at 6 AM EST, at 16.96 with the S&P futures up +11. Thus, the stock market bears remain in charge but only by 39 pennies.
The Keybot the Quant algorithm remains short and is tracking VIX 15.90 as the key bull-bear line in the sand (blue line). Thus, if the VIX remains above 16.57, the stock market selling will continue and likely accelerate. If the VIX drops below 16.57 and bounces between 15.90 and 16.57, stocks will chop sideways with a very slight downward bias. If the VIX falls below 15.90, it is off to the races for the stock market bulls with the SPX running towards 3K and higher again.
The new moon peaked on the weekend and stocks are usually soggy through this period each month. This is the darkest time of the month so over the next few days, Saudi Arabia may carry out a retaliatory attack against Iran for the bombing of their oil facilities.
Today is Rosh Hashanah so trading volumes will be lower this week. The Wall Street adage, "Sell Roshashanah and Buy Yom Kippur" is on the table. Yom Kippur is on 10/9/19. The lower volumes as the week progresses can exacerbate moves in stocks in either direction. The month and quarter-end is today, EOM and EOQ3, respectively. Window dressing took place last week which created a few days of buoyancy in equities.
October begins tomorrow and new money typically creates buoyancy in the stock market the first few days of a month and especially the start of a new quarter (Q4). All this seasonality stuff is a mixed bag and more important when the markets do not have much going on. Obviously, this is not the case these days with President Trump facing an impeachment, the ongoing US-China trade war, the global race to the bottom by central bankers, oil price drama due to Middle East unrest, the rise of protectionism, Hong Kong turmoil and the flailing global economy, to name a few of the hot spots. Traders and investors remain relatively calm and relaxed through all the turmoil; fear would be shown by a rising VIX. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added Tuesday Morning, 10/1/19, at 5:15 AM EST: Traders were concerned going into the new week of trading about the news that the US may limit Americans in buying Chinese securities. This news on Friday, as well as threats of delisting Chinese companies, sent stocks lower. Treasury Secretary Mnuchin now says there is nothing to see here and nothing is planned, move along, move along. He could have said that Friday. King Donny wants the stock market to remain elevated for the next year into the November 2020 presidential election. Also, Saudi Arabia flinches with Crown Prince Salman appearing on television downplaying a retaliation against Iran for the oil facility attack. Oil prices retreat to where they were before the attack. King Trump and Prince Salman are great at bloviating threats and espousing military bravado but then backtracking days later. These leaders should be quiet but carry a big stick rather than bloviating blowhards that carry a tiny stick. If they do not plan to use military action, they should not threaten it to begin with; it only weakens their stature. Foreign nations realize that Trump does not want a war so they will keep testing him going forward. The concern with this scenario is that it may force Trump to take military action somewhere around the globe to prove that he is a big man. Stocks recover and the VIX is jammed lower down to 16.24 at the closing bell. The central bankers step on volatility to keep stocks elevated to reward the wealthy class that own large equity portfolios.
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