Monday, August 31, 2015

S&P Looking Heavy

The S&P is trading like it wants to take another peek at last week's lows.  I don't think we can get that low, but I do think a pullback to 1900 is very possible this week.  ES 1990 acted like a lid for this bounce and the last two trading days has shown the lack of V bounce power that you saw in October 2014 and previous V bottoms over the years.  I can't overemphasize the extent of the carnage that we went through last week, it was 2011-esque, not 2014-esque.

You have VIX trading extremely strong here, much stronger than one would expect for just a 1% down day.  Add to the weakness in stocks is the weakness in bonds, a horrible situation for the market because a lot of fund managers use fixed income to hedge their equity exposure.  If both are weak, they have to sell a bit of both to reduce risk.

The Fed put is obviously lower than most market participants think, because Stanley Fischer sounded super hawkish despite the turbulence last week in the markets.  If the Fed put is much lower, then this market has to trade lower to reflect that reality.  Looking for lower prices for the rest of the week.


Anonymous said...

YOu still shorting oil here?

Market Owl said...

Short oil. Target price is $44.