Breaking News
Investing Pro 0

8 Monster Stock Market Predictions

By Michael KramerStock MarketsAug 08, 2022 08:32
uk.investing.com/analysis/8-monster-stock-market-predictions-200530531
8 Monster Stock Market Predictions
By Michael Kramer   |  Aug 08, 2022 08:32
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
US500
-2.15%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
QQQ
-2.88%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GOOGL
-3.25%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
KBH
-3.59%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
TIP
-1.03%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NFLX
-1.31%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

The Stock Market May Be Tracking The 1937, 2000, and 2008 Bear Markets

Stocks traded flat on Friday, dropping by only 16 bps. It could have been worse if not for a push higher in the final hour of trading. Stocks initially fell sharply following the stronger-than-expected jobs report and wage growth. There were a lot of mechanical pieces to the equity market being able to hold together, most notably the continued melt of the VIX index.

It is not unusual to see volatility selling on Friday, and last Friday proved to be no different. The VIX finished the day lower by more than 1%, around 21. It is indicative of puts positions being sold.

VIX 4-Hour Chart
VIX 4-Hour Chart

Despite the decline in the VIX, the VVIX index, which measures the volatility of the VIX, finished the day higher, closing at 84.13. The VVIX divergence from the VIX is worth paying attention to, as it could be an early sign volatility measures are starting to creep higher.

VVIX 1-Hour Chart
VVIX 1-Hour Chart

The VIX to VVIX ratio is coming down after hitting very high levels. It is more indicative of the big move down in the VVIX, and as the VVIX begins to normalize and moves higher, then the ratio should normalize, which should support the VIX and help it to find a bottom.

VIX/VVIX Ratio Daily Chart
VIX/VVIX Ratio Daily Chart

S&P 500

The S&P 500 still flashes a bearish technical pattern, a rising wedge. The rising wedge is well defined, and if this plays out correctly, I think the index returns to the origin of this pattern, which comes somewhere around 3,750.

S&P 500 Index, 1-Hour Chart
S&P 500 Index, 1-Hour Chart

Real Yields

A bearish setup for equities should be all that surprising, given how much yields have recently increased. The TIP ETF has fallen notably and no longer supports the recent gains in the QQQ ETF or S&P 500. Given all of the hawkish commentary from Fed governors, last week and FOMC board member Bowman, the trend in rates should continue higher.

The CPI report will be the deciding factor, and I would expect that CPI will show little to no improvement when this report comes out. Yes, commodity prices may have rolled over some, but the biggest problem with inflation is housing and shelter, which are showing minimal improvement.

TIP ETF 1-Hour Chart
TIP ETF 1-Hour Chart

Financial Conditions

I think that rising rates should lead to widening spreads and financial conditions starting to tighten again. Remember, the Fed wants financial conditions to slow the economy down and cool inflation. The more financial conditions ease, the more tightening the Fed will have to do. The Fed needs asset prices to decline if it expects inflation to come down.

IEF/LQD Daily Chart
IEF/LQD Daily Chart

Alphabet

Alphabet (NASDAQ:GOOGL) has stalled out at its prior highs and shown no momentum after posting the better-than-expected results. The RSI remains negative, indicating that bearish momentum is still in control. The bear flag pattern is also still very much alive as well.

Alphabet Inc,, Daily Chart
Alphabet Inc,, Daily Chart

KB Homes

It may also be noteworthy that KB Home (NYSE:KBH) appears to be rolling over from its recent gains. If rates increase again, it will make sense for the home building stocks to start moving lower if rates keep rising. The uptrend broke, and there is a big gap that needs to fill around $26.25.

KB Homes Daily Chart
KB Homes Daily Chart

Netflix

Netflix (NASDAQ:NFLX) has a bearish divergence forming, with the stock trending higher and hitting up against resistance at $227 and the RSI trending lower. To me, this indicates that the stock is at a turning point, and we are likely to see the shares return to the origin of the rally at around $175.

Netflix Daily Chart
Netflix Daily Chart

Original Post

8 Monster Stock Market Predictions
 

Related Articles

Michael Kramer
Stocks Rally As Rates Plunge By Michael Kramer - Sep 29, 2022

Stocks jumped yesterday after the Bank of England noted it would help to stabilize the British bond market. Rates fell dramatically across the curve in the UK, resulting in rates...

8 Monster Stock Market Predictions

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email