8 Monster Stock Market Predictions – The Week Of September 13, 2021 Edition

VIX (VIX)

Stocks sold off on Friday afternoon, finishing the week lower by over 1%. The sell-off came late in the day after the VIX ran up. Typically on Friday, we have seen the VIX meltdown into the close, helping to give the S&P 500 a boost. 

Graph, Growth, Progress, Diagram

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That was absent this week, and as a result, the VIX is very close to breaking a serious downtrend. This will need to be watched closely on Monda; should the VIX continue higher, it would indicate increased put buying is taking place in the market, and worries of a sell-off are building.

S&P 500 (SPY)

This is a pretty important spot we are currently in, with the S&P 500 sitting right on the uptrend that started last October. So a gap lower on Monday below 4,450 and the trend line would be terrible news for the S&P 500 and would likely coincide with a breakout in the VIX index. That would put added pressure on the lower Bollinger band to hold at 4,410.

But there is a problem with the Bollinger band holding at 4,410. A move below 4,440 from a gamma perspective will trigger a wave of selling pressure, with the first minor level of support coming around 4,250, which I noted this week in a write-up for SpotGamma.

So yes, this sell-off could really be the one that turns into more than just a dip; to this point, this may be the strongest case for something greater than a 5% drop that we have seen in a while. Don’t forget the RSI and where it is positioned; it is currently just above a support region at 42.

Additionally, we continue to see a lot of weakness in these economically sensitive parts of the equity market. It does make sense to some degree because now we have started to see clear signs that the economy is moderating very quickly, which is why sectors like housing, transports, and commodities have been trending lower. In fact, if the next trend plays out as I expect it to, it means earnings estimates will start turning lower, which pulls this current cycle incredibly close to that of 2018.  

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Disclosure: Mott Capital Management, LLC is a registered investment adviser. Information ...

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William K. 1 week ago Member's comment

It certainly looks like emotions, particularly FEAR and GREED, are doing a lot of the driving on prices and activity in general, since the actual value is not likely to var at such a fast and furious rate.

And emotions are seldom to be trusted in finances.

William K. 1 week ago Member's comment

Predictions based on past behavior? And how many times do we see that warning phrse: " Past performmance is no guarrantee of future performance"??? I see it on almost every posting from reputable organizations. Could it be true??