It’s going to be a busy week, that’s for sure. There will be a lot of data, including , , , and the .
Furthermore, there will be a dead Fed official speaking every day. There will also be several Treasury auctions that have been must-watch events, especially an auction on Monday, an auction on Tuesday, and an auction on Wednesday. All of these can affect market directions, for better or worse.
VIX
It fell nearly 5% last week and ended at 3,693. It would be even worse if it weren’t for an end-of-day, short-covering event, where traders are about to run out of profit. It is quite easy to see when the drops decrease by more than 7%, starting exactly at 3 PM.
S&P 500
The S&P 500 may have completed wave three down and may now be entering wave 4. I think it is more likely that this wave 4 is acting as a sideways consolidation, perhaps for a few days. If that happens, wave five of the same length as wave 1 could take the index to around 3,200 to 3,300 by the end of the first week of October. That would play nicely with the upward expanding wedge pattern we’ve been talking about for a couple of weeks now.
It will also work with the 2008 analog we’ve been tracking for a long time. The analog suggests S&P 500 bottoms around the third week of October, but the 2022 S&P 500 is running about 2 weeks earlier in some cases. So a low in the first or second week of October wouldn’t be all that surprising. The analog also suggests that there should be a pause at this point in the move down, which lines up nicely with a wave 4 potential.
Liquidity
In addition, reserve balances this week fell to $3.0 trillion, the lowest in the cycle and levels not seen since November 2020, when the S&P 500 was trading around 3,500.
QQQ vs. TIP
Many items have been good indicators to suggest that the June bottom will not work, with the ETF being one. The TIP ETF made another new low on Friday, and the TIP has traded about 12 days behind the TIP, suggesting that the QQQ is further down.
Credit Spreads
Last week we also saw a massive increase in credit spreads, with an increase in the to ratio. It’s probably a good indication that the VIX is headed higher, if those spreads continue to widen.
JP Morgan
JPMorgan CDS hit a new cycle high on Friday, and it’s worth watching as the higher the swap rises, the lower the stock price will fall. The chart below shows an inverted price for the stock and the CDS. CDS is historically low value for CDS and does not suggest a credit event is likely to occur. But what that tells us is that volatility is rising.
Shopify
Shopify (NYSE: ) is showing a bullish divergence, with the RSI trending higher and the stock price falling. The good news for the stock price is that, for now, it is holding support.
Service Today
ServiceNow (NYSE: ) broke last week’s support at $400 and is trending lower at $350. There is also a gap to fill, about $325.
Costco
Costco (NASDAQ: ), the stock with a head-and-shoulders pattern within a head-and-shoulders pattern, is getting closer to completing a smaller H&S pattern at $454.
AMD
Finally, Advanced Micro Devices (NASDAQ: ) is about to complete that gap fill around $62. With support at $73 broken, there is a possibility that it will fill the gap soon.
Original Post