It was a strange day in the markets, with the S&P 500 dropping by around 4.4% while the Nasdaq 100 fell by 6.4%. We went from the markets lovin’ the election to not so much. Perhaps that’s because yesterday’s rally had absolutely nothing to do with the election and more to do with a reset in implied volatility, as the VIX 1-Day fell back to earth.
Anyway, the VIX 1-Day closed today at 36.8, implying a one-day move of about, oh, 2.3%. The problem here is that some of that nearly 25-point rise in the VIX 1-Day was likely due to tomorrow’s jobs report, but most of it was probably driven by the AI trade melting down.
This means we may get a nice rebound tomorrow once the jobs report is released and some of that event-related volatility comes out of the market. The problem is that I have no idea where futures will trade overnight or where the index will be at 8:30 a.m. ET. So I couldn’t tell you whether the index will finish the day higher, lower, or sideways.
Technically, the Nasdaq 100 is oversold and could bounce. The last time the Nasdaq 100 fell below its lower Bollinger Band while its RSI dropped below 30 was in March. So, given how elevated volatility is and how oversold the index has become, tomorrow could be a good candidate for a rebound, particularly if some of that implied volatility comes out of the market following the jobs report.
The NASDAQ 100 also cut through its 200-day moving average, like it was made of paper.
The S&P 500 is still holding above 7,300, which has been the lower end of its trading range for some time. Meanwhile, the RSI remains above 30, and the 200-day moving average continues to hold as support. So, from a technical standpoint, things look much better for the S&P 500.
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