VIX

Stocks finished the week of Sept. 24 higher by around 50 bps, after starting the week down by nearly 2%. As previously discussed, much of the rebound was driven by a push lower in implied volatility, as noted by the sharp decline in the VIX on Wednesday and Thursday. Friday proved to be a different outcome, with the S&P 500 rising just 15 bps once the VIX returned to lower levels.

Friday’s price action seems to have confirmed that the sharp rally was nothing more than a reflexive trade due to the fast nature and movement of the volatility in the market. With the VIX back to where it started, I would be surprised if the strong buying witnessed last week sticks around. I explained this all in my recent video.

S&P 500 (SPY)

The recent rebound in the market looked to be a 61.8% retracement on both the S&P 500 cash and the S&P 500 futures. If this is the case, then the move higher was nothing more than a corrective wave in an otherwise downtrend. This would tell us that another leg lower is coming with a likely retest of the Sept. 20 lows.

US Dollar (DXY)

The dollar index looks like it is getting ready to break higher. This would not be surprising, considering non-commercials and non-reportables are buying the futures contract and have their most prominent net long positions.

Micron (MU)

Micron will report this week, and I have been relatively bearish on it now for a few months. DRAM prices have been falling more recently, and there was a massive put buyer of the September $75 strike price a few weeks ago. It looks like they rolled out of those and into the October ones, based on the changes in open interest.

You can see the triangle pattern that has formed, which is a sign of consolidation, but generally, these patterns will break in the direction of the trend, which has been firmly lower. Volume has been nothing special either, which tells us that buyers are still hesitant to step into the stock even at these reduced levels. There is probably one more leg lower left, with the potential for the stock to fall to that $58 to $60 range.

Caterpillar (CAT)

Caterpillar shares have made a lower low on the price and a higher low on the RSI. That is typically a good indication that a bottoming process is in the works. It doesn’t mean the stock can’t go a little lower still, but at least for now, that is a positive sign. A lot will depend on what happens when the stock gets to resistance at $199. If it can’t break above that level, it stands a good chance of getting back to $210.

Nike (NKE)

It doesn’t look good for Nike here, as it is gapping below support at $150 while closing below it on extreme volume. I’m hesitant to say it will fall to $133 because it is so oversold now, but the stock can’t get above $151 over the next few days; the odds of a drop to $133 increase dramatically.

Facebook (FB)

Facebook broke the uptrend last week, and now the stock is oversold. Perhaps it will rebound back to $365 over the very near-term. But once a significant uptrend breaks like this one has, it is generally not a positive sign.