Above The 40 – Stock Market Returns To Its Originally Scheduled Program

AT40 = 48.5% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 52.9% of stocks are trading above their respective 200DMAs
VIX = 14.6 (11.5% drop)
Short-term Trading Call: bullish

Commentary
The (expected) plunge in the volatility index, the VIX, says it all…the stock market is ready to return to its originally scheduled programming.

The volatility index, the VIX, broke down below the 15.35 pivot line a day after bouncing perfectly off its magic number pivot.

The volatility index, the VIX, broke down below the 15.35 pivot line a day after bouncing perfectly off its magic number pivot.

It was a news-filled week and almost everything worked toward relieving market anxieties: President Trump announced tariffs that represented concessions to political and economic pressures; the jobs report for February delivered a Goldilocks report with a bushel full of jobs, minor wage inflation, and a monthly increase in the size of the labor force that was last this large 35 years ago; and a surprise bonus with North Korea claiming it is ready to negotiate de-nuclearization of the Korean peninsula. Essentially every significant and palpable negative headwind whisked right off the market’s radar.

I used this occasion to cover my short in the iPath S&P 500 VIX ST Futures ETN (VXX). While I was bolstered by a hedge with call options in the ProShares Ultra VIX Short-Term Futures (UVXY), I was determined to fade VXX given what I saw as the high certainty of an imminent volatility implosion. I will continue this fading strategy if VXX shares remain available for shorting. However, I highly suspect the short volatility trade will get very popular all over again. Note that VXX has yet to reverse all its gains from the day the VIX soared at its highest percentage in history. I am still projecting an eventual complete reversal and more.

The iPath S&P 500 VIX ST Futures ETN (VXX) closed at its lowest point since the VIX's historic surge.

The iPath S&P 500 VIX ST Futures ETN closed at its lowest point since the VIX’s historic surge.

Part of the stock market’s original programming is to achieve all-time highs. The NASDAQ and the PowerShares QQQ ETF (QQQ) answered the casting call with 1.8% and 1.9% gains respectively. The S&P 500 (SPY) is scrambling to catch-up with a 1.7% gain that represents a convincing breakout above its 50-day moving average (DMA) and its highest close since February’s job report.

The NASDAQ powered its way to a new all-time high and delivered a resounding confirmation of its latest test of 50DMA support.

The NASDAQ powered its way to a new all-time high and delivered a resounding confirmation of its latest test of 50DMA support.

The PowerShares QQQ ETF (QQQ) delivered its own all-time high and convincingly invalidated the bearish engulfing pattern that preceded the test of 50DMA support.

The PowerShares QQQ ETF delivered its own all-time high and convincingly invalidated the bearish engulfing pattern that preceded the test of 50DMA support.

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Disclosure: long SPY calendar call spread, long SPY shares and calls, short AUD/JPY, long CORN, TWTR call spread, long USCR calls, long SSTI

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