Wed. p.m. 19/1/22. XJO breaks down through support.
XJO was down heavily today, -1%.
The index is almost back to the 200-Day MA. It has found support at that level several times now since the beginning of December. Everytime a support level gets tested, the weaker it becomes.
For now, after such a big down day, we can expect a bounce to the upside.
The spectre of higher interest rates continues to haunt the market. Rarely can the Federal Reserve hike interest rates and create a soft landing. Maybe this time is different? Powell in his recent testimony said fighting inflation is the key focus of the Federal Reserve, which doesn't sound too much like a soft landing is a concern.
Breadth today was very poor. Advances/Declines 554/949. Ten sectors down, one sector up.
VIX hasn't climbed much despite the big drop in the index. VIX readings for the past four days are: 13.66, 13.53, 13.64, 13.71. Not a lot of change for this volatile index.
This is important, as VIX depends on a formula worked on the number of puts/calls being bought/sold. If lots of puts are being sold (sending VIX higher, Market Makers (who sell the puts) have to hedge their books by selling stocks and futures, helping to drive the market lower. Market Makers (usually backed by big institutions such as banks) tend to control the market. If the market drops heavily, and VIX doesn't move much, then the fall can be attributed to retail investors (the dumb money) and they are usually wrong.
So today's big drop could be a furphy. We'll see.
European markets opened well on the negative side but are since rebounding fairly strongly. Still too early to read anything into it, but promising.
See you all in the morning.
No comments:
Post a Comment