Vix saw it's key ascending for the first time in almost 8 weeks. This may come as a surprise to many traders, but as we mentioned in our live analysis yesterday, the Vix contract rolled over, and absent any negative inauguration outcomes, which was always unlikely given the incredible military presence in washington, there was potential for VIX to be sold off similar to what we saw in November. So said, so done.
I'll be watching Vix closely today to see if we get support at the post March crash low, and then potentially accumulating more UVXY sub 10's. Risk protection is cheap in my opinion, and stocks are not just overvalued, that would be one thing. But, stocks are at all-time high's, with the QQQ's hourly just below 85. That's extremely overbought folks. I've been looking at the a lot more lately, and I've noticed that in many cases, in the past week or two, we've seen a standard deviation of up to 3, struggle to contain the euphoric price action. This isn't going to last forever, as we all know, and so I will continue to position for the worst case scenario, and I won't let greed overwhelm my investing and trading principles.
Key levels to watch on SPY today are the all-time high, of course, near the green ascending trendline around 386, the upper band of the white channel around 380, and the 21 day around 375. I'm keeping an eye on the dollar as well, as we've been expecting a breakout off the back of a potential inverse , which could be about to materialize. This would coincide with a rise in yields, which should also see the 10Y yield breakout to the 1.25% - 1.41% range. As always, I appreciate your time today guys, and I hope you enjoyed the analysis. Cheers, Michael.
*I am/ we are currently holding positions in UVXY , HUV , HQD , QID .
Also I've read a lot of opinions on how the S&P 500 for instance is overvalued on e.g. a forward P/E basis but shouldn't we take in account that earnings have fallen substantially (typical in recession), while the market has priced in a recovery backed on government support and improving economic data (stock price has risen). This raises the numerator (P) while the denominator (E) falls - thus creating stretched valuations. Companies will grow into these elevated valuations as earnings will improve and lowers the P/E; provided stock prices have topped out. Would love your opinion on this :)
To bears here, consider maybe its not so much about optimism but about what you can do with money. Goods cannot increase in price because people are not getting around spending (low demand), so no inflation. But mannn market is flooded with money, and $1200 paycheck is coming soon. What would i do when i receive the $1200? Buy more index fund of course