When USDJPY, WTI and TNX all plunge, stock prices almost always follow suit.  When they don’t, it’s usually because VIX is signaling the algos that there’s nothing to worry about.

It’s no surprise, then, that the three equity breakouts (the purple, gray and white channels) we’ve seen over the past month have all been precipitated by breakdowns in VIX.

It’s particularly common on weekends and during low-volume holiday weeks and is frequently contrary to the economic news of the day.

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The breakout fell flat, yesterday.  ES might have closed 26 points off the ramp highs had VIX not performed its usual theatrics.  Futures are essentially flat this morning as we await Fedspeak from Williams (centrist) and Mester (hawk.)  Despite nearly unanimous expectations for a rate cut in July, most of the recent such comments have tilted hawkish.Will today’s comments support the prevailing view? I’m not so sure.  And, I’m not so sure it matters that much.  The 10Y continues to cling tenuously to 2%.continued for members… (more…)

The August 2018 new all-time highs lasted five weeks and, when they failed, yielded a 600-pt plunge.  The May 2019 new all-time highs lasted about 6 hours and yielded a 225-pt plunge when they failed.  The June 2019 new, all-time highs lasted 3 days and yielded a 51-pt decline before staging a recovery that will (coincidentally, I’m sure) see new highs posted on this morning’s open.

Perhaps the trade war really will be resolved this time. And, maybe OPEC really will ink a new trade output deal. Heck, the Fed might even cut rates even though markets are at all-time highs.

All I know is that while chasing new highs on the back of VIX “breakdowns” and oil “rallies” has worked out fine for buy-and-hold types (who have no fear of the music stopping), it has been a losing proposition for traders.

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