Invesco QQQ ETF Uptrend

Last week Digest Issue 26 " The 200-Day Snag [Charts]" focused on the 200-day Moving Average after the S&P 500 Index closed below this important level the previous Friday. Several indicators were flashing caution lights. However, supported by the big cap NASDAQ stocks that apparently didn't see the caution signs, the S&P 500 Index advanced every day last week. The Market Review below has more along with an Invesco QQQ ETF call spread idea to consider.

S&P 500 Index (SPX) 3130.01 gained 120.96 points or +4.02% last week after bouncing smartly off the 200-day Moving Average. The Island Top Reversal formed by the June 10 breakaway gap remains the active pattern. However, should it continue advancing into and close the open gap, thereby overcoming resistance, expect the pattern to lose its influence.

CBOE Volatility Index® (VIX) 27.68 declined 7.05 points or -20.30% last week. Our similar IVolatility Implied Volatility Index Mean, IVXM using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option, declined 6.93 points or -23.93%, ending at 22.03%.

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The spike up to 77.15% on Monday, March 16, the day SPX declined 324.89 points, likely marks the top for this market decline. Based upon regression to the mean theory, its arrival near 20% suggests the SPX will likely continue higher.

VIX Futures Premium

This next chart shows as our calculation of Larry McMillan’s day-weighted average between the first and second-month futures contracts as of last Friday.

With 12 trading days until July expiration, the day-weighted premium between July and August allocated 48% to July and 52% to August for a premium of 7.10% moving into the yellow caution zone; much improved since June 26 at -.87% in the red bear zone.

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The premium measures the amount that futures currently trade above or below the cash VIX, (contango or backwardation) until front month futures contract converges with the VIX at the next monthly futures expiration on Wednesday, July 22.

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Disclaimer: IVolatility.com is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter ...

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