Stocks Rip Higher On October 5 As The VIX Dumps, For Now

A cowboy competing in the bull riding event at a country rodeo

Stocks rose today by 1.05%, gaining back some of yesterday’s decline. The index traded as high as 4,369 but fell roughly 50 bps in the final 45 minutes. This coincided with the VIX pushing higher, after finding support around 21 once again. It seems pretty clear that as long as the as the S&P 500 continues moving on a daily basis between 1 and 1.5%, the VIX is going to find it hard to break meaningfully lower. It seems as if today’s rally was inspired by volatility selling, nearly an identical but inverse version of yesterday’s trading session.

VIX (VIX)

But what is notably different is the highs in the S&P 500 continue to be lower, and the lows are getting lower for the S&P 500. Meanwhile, the VIX is pretty steady in this 21 to 24 region. The significant risk here is a spike in the VIX above 24, which would be a de-risking event for the equity market.

(Click on image to enlarge)

S&P 500 (SPX)

It looks like the S&P 500 filled yesterday’s gap lower and hit resistance at 4,365. Now it seems like we have a gap to fill tomorrow at 4,305. Today’s pattern seems incredibly similar to the one on September 23 (see the “2”), with the same gap higher and widening wedge/diamond pattern. It suggests a big drop back to 4,300.

(Click on image to enlarge)

Nasdaq (NDX)

I was convinced this morning there was a bear flag in the Nasdaq 100 Futures, which turned out, for now at least, to be wrong. It still looks like the bear flag is there, but with a throw-over for now, sucking buyers into the market. We will see if it falls tomorrow back through the lower end of the flag. If so, we should see prices below 14,600.

(Click on image to enlarge)

Square (SQ)

Square rebounded sharply today rising by more than 4%, but all it seemed to accomplish was filling the gap from yesterday and then returned to its previous trend which was lower.

(Click on image to enlarge)

Amazon (AMZN)

Amazon also rebounded today, but it was a fairly weak bounce, regaining only part of yesterday’s losses finishing well off its highs. It appears there is a pretty well-defined downtrend in the chart with the $3,200 support level still the major inflection point.

(Click on image to enlarge)

Apple (AAPL)

Apple was no different from both Square and Amazon. With a clear trend lower still in place and the appearance of only a gap fill being completed. The trend toward $130 still seems to be well intact.

(Click on image to enlarge)