We need a stock to save the market

BY ANDREW GIOVINAZZI

April 19, 2024

Yo Pit Crazies,

You still have a chance to join our Summer Event for Option Pit. And yes I am bringing some flannel shirts to Chicago in July.

If you have not noticed since Friday every rally gets sold. I don’t know when that will stop but I do know it is happening currently. I was looking forward to Netflix Inc (Ticker: NFLX) as the first bellwether tech stock to make some hay but then they went nuts and decided not to report subscriber growth in the future.

Less information is rarely good. After the near 100% gain since November I think folks wanted unicorns and rainbows and they did not get them. That is not great for stocks.

6 year NFLX chart

As many of you know, I am interested in volatility. Let’s call it the blood pressure of the market. What is the first thing the doctor checks when I go for a check up? My blood pressure for sure.

Now two things are going in the same direction and that is giving a strange signal.

Let’s see what they are.

VIX and SPX are both heading down

Since Apr 15th, both VIX and SPX are heading down. The big vol pop from the Iran attack did not materialize in disaster but stocks never recovered. More Fed Chair Powell testimony did nothing to help. Inflation is back on the upswing and that has traders worried that the current rates are not high enough to do the job. Certainly not when the USGOV is spending 3 trillion dollars a year more than it takes in. A lot of the recent rally was on the back of declining inflation. That ship has sailed for now.

So stocks will remain sluggish until some AI pixie dust hits the market again. I expect SPX to drop below 5000 and just grind lower until some improved earnings come by. In my products I will try and just take the short pops I get in SPX to close any upside. You can try Weekly Profit Cycles if you like that idea.

Lower SPX and lower VIX just means the market does not expect big selloffs, just lazy, hazy down the river declines. Until we get good headline news out of earnings stocks will slump in the short term.

All the Big Tech earnings do not come out until late April, early May so expect more listless trading. Trading Desk, OP Pro and Weekly Profit Cycles will find things to do and help you make money in the meantime.