Summary
Rhetoric heated up again in the Middle East on Thursday, sending stock futures down, WTI and Brent prices up, and VIX futures higher by almost 5%. Patterns on the VIX are tough to gauge, but the volatility index looks to be working on a double bottom. There was a five -day/13-day exponential-moving-average (EMA) crossover buy signal on Wednesday, the first bullish indicator since early April. Considering what has transpired geopolitically, we are surprised that option premiums on the S&P 500 (SPX) have not pushed the VIX higher than the current low-20s reading. During the tariff-induces drop in April, the VIX spiked to 60%, but quickly fell back during the early part of May. For the S&P 500, additional big losses could lead to a five-day/13-day EMA crossover sell signal, which would reverse the buy signal from April 24. On the downside, initial support from the 21-day EMA sits at 5,940. The 200-day is down at 5,813 and the key breakout level from the inverse head-and-shoulders pattern comes in at 5,775. A minor 23.6% retracement of the advance lies at 5,770. Daily momentum traced out a mild bearish divergence at the closing h
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