Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Technical Analysis

Chicago Board Options Exchange Volatility Index / Technical Analysis

Chicago Board Options Exchange Volatility Index

Regular readers will know that a useful comparison has been made about the rally in the Dow Jones since last years low with the rally seen from March 2009 to May 2010.A similar comparison has been made between the S&amp;P 500 / Bonds Ratio over the same periods - see <a href="https://www.smartkarma.com/insights/us-equities-time-to-get-defensive" target="_blank" data-smartkarma-citation="insights:51332" rel="noopener">US Equities: Time to Get Defensive</a>These comparisons have so far given good guidance about turning defensive on equities over the past month and bullish on Bonds.In a similar fashion, the chart below compares the trends in the VIX Index with the aftermath of the last crisis 11-12 years ago.The similarities in the levels at work are striking and warn of possible complacency in the market place that could lead to much higher levels of volatility than seems to be generally expected.

Regular readers will know that a useful comparison has been made about the rally in the Dow Jones since last years low with the rally seen from March 2009 to May 2010.A similar comparison has been made between the S&amp;P 500 / Bonds Ratio over the same periods - see US Equities: Time to Get DefensiveThese comparisons have so far given good guidance about turning defensive on equities over the past month and bullish on Bonds.In a similar fashion, the chart below compares the trends in the VIX Index with the aftermath of the last crisis 11-12 years ago.The similarities in the levels at work are striking and warn of possible complacency in the market place that could lead to much higher levels of volatility than seems to be generally expected.

Cross Asset Strategy

In a note titled <a href="https://www.smartkarma.com/insights/bonds-all-charts-lead-to-me" target="_blank" data-smartkarma-citation="insights:52482" rel="noopener">Bonds: All Charts Lead to Me</a> on 3 June 2021, it was suggested that US 30 year yield would make it to 1.90%-1.92% area.That target has now been met. However, fresh developments must be taken into account while trying to determine what happens next.

In a note titled Bonds: All Charts Lead to Me on 3 June 2021, it was suggested that US 30 year yield would make it to 1.90%-1.92% area.That target has now been met. However, fresh developments must be taken into account while trying to determine what happens next.

It became increasingly clear at the end of last week that every market is reacting to the relative hawkishness of the Federal Reserve.First off the blocks were the USD and Fixed Income markets. Soon after metals reacted poorly, and Oil could not continue higher. Now we see important concerns in US Equity Indices. The Dow broke key levels and the S&amp;P 500 is now in focus below. In summary nearly all of the recent moves we saw towards the end of the week are likely to continue especially lower metals, lower long end yields, and lower equities.

It became increasingly clear at the end of last week that every market is reacting to the relative hawkishness of the Federal Reserve.First off the blocks were the USD and Fixed Income markets. Soon after metals reacted poorly, and Oil could not continue higher. Now we see important concerns in US Equity Indices. The Dow broke key levels and the S&amp;P 500 is now in focus below. In summary nearly all of the recent moves we saw towards the end of the week are likely to continue especially lower metals, lower long end yields, and lower equities.

The picture on the Dow Jones Industrials Average is unfolding in a manner that is still similar to that seen a year after the last major crisis almost a decade ago - and it is troublesome in the short run.One way or another, in whichever strange ways, history has a way of somehow reflecting it’s previous shades. A year after the lows, the stock market today is once again showing signs of short term vulnerability as it did in 2010, a year after the stock market low of March 2009.Perhaps the leading signs are seen on the Dow Transportation Average which has already declined notably since the first half of May. Any lower on either the Transports or the Industrials would amount to significant bearish breaks that would argue for 6%-9% declines from current levels depending on which average we choose to look at.Perhaps it was bad timing for the Fed to be hawkish this month. Or this is a reaction to the Fed’s hawkishness itself. Either way, should this bearish picture on the Dow, as well as the bearish ones in most commodity markets, unfold, expect the Fed to “back track” on some of its recent messages.

The picture on the Dow Jones Industrials Average is unfolding in a manner that is still similar to that seen a year after the last major crisis almost a decade ago - and it is troublesome in the short run.One way or another, in whichever strange ways, history has a way of somehow reflecting it’s previous shades. A year after the lows, the stock market today is once again showing signs of short term vulnerability as it did in 2010, a year after the stock market low of March 2009.Perhaps the leading signs are seen on the Dow Transportation Average which has already declined notably since the first half of May. Any lower on either the Transports or the Industrials would amount to significant bearish breaks that would argue for 6%-9% declines from current levels depending on which average we choose to look at.Perhaps it was bad timing for the Fed to be hawkish this month. Or this is a reaction to the Fed’s hawkishness itself. Either way, should this bearish picture on the Dow, as well as the bearish ones in most commodity markets, unfold, expect the Fed to “back track” on some of its recent messages.

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Base case called for a head fake rally that fell just shy of our 4,264 projection as we roll into the more turbulent late June cycle. Slipping back below 4,240 represents a breakout failure and did break some short term support (now resistance on a bounce attempt).Our short focus has been  the DJI  that is showing some breadth and Dow theory red flags by not seeing a minor new high in line with the SPX. Our attention now turns to the NDX at the top of the wedge as the next short play.USD is gaining traction as yields bounced off of key support.A late June wobble and potential tantrum will set the stage for a nice long entry in July.

Base case called for a head fake rally that fell just shy of our 4,264 projection as we roll into the more turbulent late June cycle. Slipping back below 4,240 represents a breakout failure and did break some short term support (now resistance on a bounce attempt).Our short focus has been  the DJI  that is showing some breadth and Dow theory red flags by not seeing a minor new high in line with the SPX. Our attention now turns to the NDX at the top of the wedge as the next short play.USD is gaining traction as yields bounced off of key support.A late June wobble and potential tantrum will set the stage for a nice long entry in July. 

SPX Breakout Failure and Where to Focus Shorts into Late June Wobble

United States

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

S&P 500 INDEX (SPX INDEX)

VIX Index: How Concerned Should We Be?

The signs on the VIX Index not only show a historical similarity to the aftermath of the last crisis but also complement the bearish signs seen on...

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US 30 Year Yield: Target Met, What Next?

The 1.92% target on US 30 year yield has been met. However in the context of recent market developments, there still appears to be the danger of...

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S&P 500 Shows Further Warning Signs

Along with every other major market, the S&P 500 has also reacted to the Fed. Last week's bearish reversal as well as the stocks/bonds ratio are...

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US Equities: Dow Troubles

The Dow is in trouble whether looked at independently, with the Dow Transports, or taken from an historical trend perspective. Watch these levels...

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SPX Breakout Failure and Where to Focus Shorts into Late June Wobble

Base case called for a head fake rally that fell just shy of our 4,264 projection as we roll into the more turbulent late June cycle. Slipping back...

Thomas Schroeder