Twenty Cents From The Apocalypse

The volatility futures sit roughly 20 cents from inverting. That one print would change how I feel about this market substantially.

We are not there yet. We are close enough that I want you watching it tonight.

Start with the damage. The S&P 500 shed about 130 handles and closed down almost 2%. The Dow took it worse at over 2.3%, and the Russell dropped 2%.

The Nasdaq carries the real story. It now sits 11% off its recent highs. That puts it officially in corrective territory.

Here is the piece nobody is flagging. The advance decline line still shows rotation. Nobody came in and pummeled 100 stocks today.

Capital moved into Netflix, Walmart, and Starbucks. Consumer staples still hold a bid. Traders still have belief.

Volatility does not really get started until correlation shows up. We are not home yet.

The selling began overseas. South Korea hit multiple circuit breakers overnight. That market now sits down about 35% from its absolute high.

Then the FOMC landed. Rates held steady. The market ripped, then went into a free for all once Kevin Warsh finished speaking.

The probabilities tell you why. September now carries close to a 60% chance of a rate hike. We do not hear from the Fed again until September 16th, and that is the longest gap between meetings on the calendar.

Earnings offered no rescue. Microsoft closed at 390 and traded near 397 on a $26 expected move, which is a nothing burger. Meta missed on the top and bottom line.

Here is what I broke down in tonight’s video:

7350 is the marquee level I flagged in the weekend update. We breached it today, and mostly in the after hours. If we rally from here, 7511 likely caps it.
SPX closed at 7316 while S&P futures traded 7326. The lower edge of the expected move sits near 7270, and that is the level to latch onto in the overnight session.
The volatility futures are approximately $0.20 from backwardation. August eclipsing September makes it all hands on deck.
The VVIX pushed into the 110 region. I call that the bomb zone, and it is an extreme reading.
Tomorrow’s session prices a $71 expected move. Between now and Friday, the number runs over $105.

Apple and Amazon still have to report. Apple sits at all time highs walking into that print.

We already opened Pandora’s box on volatility. We are going to be in this for a while.