Yo Pit Crazies,
The White House reported muted inflation, down to a “0% gain in the month of July in change in CPI index” – or something like that.
Top-line annual inflation was still 8.5%, which was enough to get traders thinking peak inflation was somewhere in June when the market bottomed.
Stocks of all sorts flew as the S&P 500 went to 4200.
Algo driven madness? Perhaps. Stock buying was certainly widespread.
But here’s the indicator that makes me think the rally will hold.
VIX Volatility Is Back to April Levels
Earnings were not great, you say and I agree.
Much of the recent weakness, if you can call it that over the last two weeks, was the inflation and supply chain toll on corporate earnings. No big company I saw actually posted a decent number. Not much was expected either due to economic conditions.
What Conditions?
War, shortages, energy politics, inflation, supply chain, vaccine efficacy, mandates… the list was long. And to be quite honest, all those things are present, it is just that the USA is adjusting to them.
As long as it does not get worse, traders start to triangulate the future.
VIX six-month chart with oneday candles. VVIXis shown as red chart on the second chart
That is what Vol Man is pointing out in the VIX chart above. The VIX is back to where it started when the Fed changed rate raising gears. They still are going to raise every month, but traders are betting the pace will be where it is and not worse.
I am predicting the SPX levels will hold up above 4100 for a while, at least until the next rash of data comes out. The Fed won’t put out a new increase until September, so VIX could be just a teenager for a while.
I will rap on it next week.
The Rundown
Big Money Shopper
Mark and Licia’s system is bringing the wins big time in this trending market.
Affirm Holdings Inc (Ticker: AFRM) Aug19 33.5/40 call spread closed for a 107% gain
To Your Trading Success,
AG