Stocks Jump, As Implied Volatility Melts
2022.04.26 10:06
S&P 500
As noted on Saturday’s post, the Vanna rally arrived late in the day on Monday, and it helped the S&P 500 close higher. The index rose by almost 60 bps after trading down by more than 1% most of the day.
The index managed to close just below 4,300, and I think there is a possibility that the index will advance a bit further to around 4,330 to 4,340. But I doubt this rally is sustainable.
S&P 500 1-Hr Chart
VOL
The VIX got too high yesterday, crossing above 31, which was not sustainable when the S&P 500 was down 1%. It was no surprise that the VIX imploded late in the date to close around 27.
Could the VIX go back to 24? Yes. Could it go back to 20? Doubtful. The risks going into the FOMC meeting were too high, and traders will need to buy protection heading into that meeting.
VIX 1-Hr Chart
Rates
There was a lot happening Monday, and most of it centered around China and its slowing growth. That sent nominal bond yields lower, but real yields rose some.
So the fact that the NASDAQ rallied made no sense from a fundamental standpoint and should have given you a clue as to the rally’s sustainability.
TIP Bond ETF 1-Hr Chart
ARK Innovation ETF
The ARK Innovation ETF (NYSE:ARKK) rose around 3% Monday, but I guess it was due after falling 11% last week. The ETF moved back to resistance around $54.35 and nothing else. It seemed like a dead cat bounce.
ARK Innovation ETF 1-Hr Chart
Shopify
Despite the ARKK ETF and the Invesco QQQ Trust ETF (NASDAQ:QQQ) being up, Shopify (NYSE:SHOP) finished flat, surprising. There is still another shoe to drop here, given the declining RSI.
Shopify Daily Chart
