The Option Pit VIX Light Is Red, And Volatility Is Likely To Drop.
The VIX closed down on the day,
But not all the way down at the lows …
Was it because the S&P 500 went negative on the day briefly, before pulling up to close higher?
I had to see it to believe it …
But the VIX movement today had very little to do with the S&P 500.
Yes, the S&P 500 did not close near the highs, and was even briefly down …
But that is NOT what drove the VIX …
It seems it is meme stocks driving VIX higher!
Check out this one-minute chart. On the top is the VIX, and the bottom is AMC Entertainment (Ticker: AMC) …
When AMC made its wild run higher mid-day was when the VIX started to run hot …
Once AMC calmed down, so did the VIX.
We saw something similar with GameStop (Ticker: GME) back in February …
In that case, once GME sold off, so did the VIX …
I think we could see the same thing this time around.
AMC could run higher for another day or two (although it kind of feels like Thursday is setting up to be peak meme) …
As AMC plays out, I expect VIX to be firm — maybe not shoot higher, but at least have trouble really selling off.
But once the gas runs out of AMC, it’s “look out below!” for both AMC and the VIX.
Take a look at VIX vs GME in February and tell me I am wrong:
When this meme runs out of steam, the VIX is going to plummet …
In the ‘meme’ time, expect a firm VIX …
Your Only Option,
Hey Influence Traders,
There have been a number of high-profile cyber attacks this year.
And they do not show signs of abating.
They do have a real impact on everyday life, however.
Oil, meat, insurance, transit … what’s next?
Make no mistake: we are in a cyberwar.
But with cyberattacks on the rise, many companies are positioned well to win …
- Colonial Pipeline, operator of the biggest gasoline pipeline in the U.S., shut down operations following a ransomware attack from a group called DarkSide. The attack disrupted supply of gas and diesel to the East Coast and caused lines reminiscent of the 1970s. Colonial paid DarkSide a $5 million ransom in untraceable cryptocurrency within hours of the cyberattack.
- CNA Financial (Ticker: CNA), one of the largest insurance companies in the U.S., paid $40 million in late March to regain control of its network after a ransomware attack.
- A group of hackers suspected to have links to the Chinese government breached computer systems belonging to New York’s Metropolitan Transit Authority in April. While no data was stolen it shows the vulnerability of our electronic infrastructure.
- JBS SA (Ticker: JBSAY), the world’s largest meat packing company, closed slaughter plants in the U.S., Canada and Australia over the weekend after its servers (computer, not restaurant) were attacked. The two-day closure wiped out nearly a fifth of the nation’s beef, pork and poultry production. Continued closures could cause the price of beef to surge past its current near-record high prices.
A Winning Cyber Play
Cyberattacks are becoming more — and that’s not good for the likes of those mentioned above.
However, there are those positioned to win. For instance ….
Global X Cybersecurity ETF (Ticker: BUG) is a good, broad-based play on cyber security that invests in 32 different securities.
BUG seeks to track the Indxx Cybersecurity Index, which is designed to provide exposure to exchange-listed companies that are positioned to benefit from increased adoption of cybersecurity technology.
BUG is going into the Power Moves Starting Lineup — so stay tuned.
Cutting Through the Noise for You.
The Fed is out of bullets for now and it raises a very important question… Without the addition of new money into the market can it continue to trend higher?
Today I will show you what the inside info is showing and where I think stocks are headed…
From the very beginning Power Income and being an #Income Hunter has been all about Trading the Fed…
So far, it has worked like a charm… We had full confidence the Fed would keep printing money to create inflation so be long equities, especially equities in the energy and commodity sectors…
Inflation is now here and it removes the ability for the Fed to print new money for now… So, let’s take a look at where money supply and S&P stack up against each other….
You can see from the graph below how tight the S&P tracks money supply… They have converged with S&P at 4,200 and M2 at 20 trillion… The S&P must now stand on its own merits of value…
That may be a problem because during this powerful 10-year uptrend when money supply was neutral or even worse going lower the S&P went down…
I have a few other important signposts to show and then look at the technicals and trades to consider…
Where is All the New Money Going?
As I’ve said for months, for inflation to really explode, we not only need new money injected into the economy — but it also needs to be spent on goods and services.
Our measuring stick for the spending activity is velocity (or the number of times a dollar is spent).
The Fed graph below illustrates that velocity continues to languish at the lowest levels in decades. It is barely above 1!
The Fed could ultimately be right about inflation being temporary if velocity stay’s down throughout the reopening recovery
Precious Metals Win in Inflation or Deflation
We’re at an inflection point for an allocation shift. If growth slows, industrial metals — which are driven by economic needs — could go through a drawdown phase.
However, silver and gold are monetary metals, so they will track interest rates and the dollar more closely than they would a strong or weak economy.
A case in point is the copper/gold ratio below. The calculation used is copper divided by gold.. An uptrend is copper outperforming gold and vice versa. Copper has outperformed gold since COVID hit and the trend recently turned.
This could be an indication of a shift in perception that the economy is expected to weaken in the second half of the year while inflation remains high…
The Three Possible Scenarios for Precious Metals:
- During this down period for stimulus, the Fed’s hands are tied. But if the stock market corrects, the Fed will jump on an opportunity to increase quantitative easing (QE) or work with the Treasury to inject money directly into the economy. That is bullish for the metals and all commodities.
- If interest rates rise due to ever increasing inflation, the Fed would step in and implement yield curve control — basically QE on steroids — to buy enough bonds to hold rates down. That would be mega bullish for precious metals.
- The only scenario that would be bearish for precious metals is if the Fed did nothing and just let the economy melt down, creating massive deflation in which all assets had to be sold in order to remain solvent. That would be a 1929-style depression.
I am confident the Fed won’t let No. 3 happen, so at this point I believe institutional investors will allocate money away from stocks and into precious metals on any signs of economic weakness.
Bring It Home
This is the first fork in the road that we have reached since COVID hit. It is a very difficult one for the Fed, because they know they need to keep feeding the market new money, but they need a reason…
That reason will most likely be a significant correction in stocks, and I will continue to monitor for signs that give us an edge.
Live and Trade With Passion My Friends,