EB Daily Market Report - Special VIX Update - April 16, 2024

Your Daily 5 Video

Roughly once per month, I join StockCharts as a guest for one of their regular shows, "Your Daily 5". It's an opportunity to discuss 5 charts that I feel are very important in the moment. Today, I featured the Volatility Index ($VIX), the 10-year treasury yield ($TNX), IWM, QQQ, and AAPL.

The video should be published on YouTube very shortly and I'd encourage all of our EB members to watch it for a current assessment of market action. It was recorded earlier this morning.

Quick Market Recap

I believe we remain in a secular bull market and that current weakness is a nice buying opportunity for the long-term. The short-term? Well, it's a little dicey. If you tell me which way the VIX is going to go from here, then I'll tell you whether it's a good idea to be long.

I watched the SPY, QQQ, and IWM struggle to bounce back today, though the IWM did actually perform a bit better during today's earlier bounce. But just in the past 30 minutes, the 10-year treasury yield ($TNX) spiked back up to test the bottom of gap resistance at 4.70% and our major indices quickly dropped more than 0.5%. Herein lies the problem with a VIX at or near 20. Sudden moves, in both directions, out of nowhere begin to appear and this whipsaw actions sends our emotions on a roller coaster ride. The tendency is to chase and to overtrade and neither strategy works well.

I'm considering the cautious approach and keeping my capital intact. Therefore, I'll move to cash if the VIX closes above 20. At last check, it's down more than 4% today and trades at 18.33. If we see another selloff and the VIX closes above 20, I'm out - temporarily. A huge reversal in the VIX would be a reason to consider leveraged long positions - for those with very aggressive appetites. I'm not making that call just yet.

One surprise so far is that the equity-only put-call ratio ($CPCE) has remained in neutral territory the past few trading sessions (in the .60s), despite the selling and yesterday's breakdown on the S&P 500 and the NASDAQ. Quite honestly, I'm not sure if that's good news or bad news.

To summarize, the stock market is extremely confusing at stages like this - when the VIX rises significantly - and if you trade, just expect to be stopped out frequently.

Happy trading!

Tom