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Monday, August 14, 2023

Weekly Wrap-up & A Look At The Weeks Ahead

Market continues to try to build a base

We saw a little more weakness on Friday, but this sell-off has been pretty drab. I don't know who has the patience to sell every rally to a slightly lower low, but I sure don't.  

This is the typical boring action you expect to see during the summer doldrums. 

What's not typical is to see the market pull back on such a low $VIX, but this is starting to look like the new normal. Sell the market in tiny increments, in order to prevent the $VIX from spiking; in order to keep downside momentum to a minimum; to keep program selling from kicking in.  

I remember CNBC traders calling this - pullback on a muted $VIX - trade out; seems like about a year ago, and at the time I thought that was the stupidest thing I had ever heard, but as it turns out they must have been clued in to what the new game plan was going to be. Walk the market up/or down on low volatility.   

I think it was just after that time - when Fast Money traders made that call - that we saw volatility spike to 30, after several Banks failures, but it was only a few days before the $VIX was being hammered below 20 again. 

Of course eventually we'll see some real fear in the market, and the $VIX will be allowed to run, but as I predicted weeks ago, I don't believe the $VIX is going to get back above 20, any time soon.  

As I predicted August 2nd

Regardless of all the negative news, and selling overseas; even if we see a pullback this week; I don't believe the $VIX can even break above the 20 level.

The Fix Is In  

In order to ensure that stocks continue to hold up into the end of 2023, Government Sachs even released a statement - over the weekend - predicting that Fed rate cuts are coming!  

 Short Term 

The broader market continues to try to build a base. I thought we saw that happen on Wed. but the plug was quickly pulled on the Thursday morning rally, and equities even managed to close a little lower on Friday (weekly OPEX).

We have an early Monthly (August) Options Expiration coming up, this Friday, so perhaps we see continued weakness heading into that date.    

We've basically seen the market consolidate a little lower, over the past Month, and the $SPX is still trading above the 50 day moving average. 

Once we see buyers return, I'm expecting to see a counter-trend rally - at least. 

Longer Term 

If we don't see a rally into August OPEX, then I think that sets up for an even more powerful rally, going into the Labor Day holiday, and Sept. OPEX.  

Next comes Sept. window dressing, as traders return from the summer break.  

Oct. Same thing: OPEX comes early (Oct 20th), and Columbus Day is a short week, ending on lucky Friday the 13th!  

Nov. brings with it another early Options Expiration, 1 week before thanksgiving. 

Dec. OPEX lands on the 15th. and the first day of Hanukkah (at sunset). 

 Take Care, AA  

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