The stock market just flashed the first sign that investors think the Silicon Valley Bank crisis is over.
π The CBOE Volatility Index VIX closed below the 20 level on Wednesday, for the first time since SVB - The Silicon Valley Bank collapsed. That is basically could be a constructive sign and is certainly counter to the general gloom of investors post SVB-failure.
π The VIX term structure is also back into normal contango. This normalization of spread is often a sign investors see the worst of the crisis behind. The lower chart illustrates 3-months futures spread between VXN2023 a July, 2023 VIX Futures contract and the nearest - VXJ2023 - April, 2023 VIX Futures contract, that is three months ahead of that, marking that the reddish days are over.
π S&P500 Technical picture indicates the breakdown of reversed Head and Shoulders Chart Pattern structure is happening. SPX is above weekly SMA (200) as it got the support early on Q4'22. 52-weeks simple moving average is trying to hold on above, for the 12th year in a row.
π If investors expect an imminent financial crisis but one doesn't materialize, the change in sentiment will help drive stocks higher as investors unwind bearish positions and get more bullish . All-in, with stocks higher over the past six months since the mid-October low, so further upside could be ahead. If stocks do not make a new low post this crisis, the bears could capitulate.
Trade active
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31-03-2023
ππ VIX Magic Power Works
Trade active
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01-04-2023
SPX TR is on the Bullish path, breaks 11-months resistance at the end of Q1'23.
Based on SPX seasonality over the past twenty years the following month (April) averagely is positive in 80% cases (the best month as well as November). In years over the past twenty where Q1 return is positive, the following month (April) averagely is positive in 86% of all cases (the best month in a year).
I posted a bearish case but I think there's a possibility that you could be right. I also see the reverse H&S. I just don't see us getting back into our 14 year trend line though. Thanks for posting and for the detail. I do think any upward rally from here would be a bull trap.
Pandorra
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@Petrichor_, Thank you for comments. I've been waiting this breakdown all the March. But Fed.. Powell.. rates.. SVB.. FRC gave no chance. But I still hope the H&S is there, as fears subside. Moreover, April is one of the best calendar month for SPX.
Petrichor_
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@Pandorra, Yes ... so many reasons to fall, and it didn't. It's "feeling" like it's not going to happen, but I still read it in the chart. I do think XLE could be what drives us down, but that's particularly dependent on the next two days of PA there. We could be reaching for 4200 for the first two weeks of April, before finally turning. Thanks again for your perspective.
Pandorra
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@Petrichor_, Lets see what is next for SPX components. Technically, perhaps I'll be more confident when SPX TR break 11-months resistance at the end of March/ Q1'23
Pandorra
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@Petrichor_, I'm very bullish on xle and it's components
financialfreedomgoals101
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Yup, Breakout above trendline still confirms the bullish bias ahead.
Pandorra
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@financialfreedomgoals101That seems very True ππ
dotcom880
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As long as potential weak players are being bought and supported with cash injections, we'll keep going up. But once that stops.. All bets are off.