Traders Vote That the VIX Will Fall After the Election
As voters head to the polls, traders test the waters of their favorite stocks. Plus, analyses of AMZN, ADBE, TOST, DTE, and DTM.
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The Market
Today’s oversold rally had some decent statistics, unlike almost all of the rallies we’ve seen since mid-September.
Breadth was quite good (to add to yesterday’s good breadth). It hasn’t changed any of the indicators yet (except that the Overbought/Oversold Oscillator scooted upward), but 80% of the volume was on the upside. And that is a good showing, even if you think volume was low.
Then there were bonds. They began the day down and managed to come back to up slightly on TLT. I like that, as you can imagine. I do not like that all of a sudden, everyone seems to like bonds. Where were they last week? That being said, keep in mind the FOMC meeting is on Thursday.
The ten-day moving average of the put/call ratio did not budge (it is still .99), but I do want to follow up from the discussion on the weekend regarding the VIX put/call ratio because yesterday it flew to 3.02. I have not seen a reading that high since a few weeks before the 2020 election. That’s a lot of betting that volatility will come down post the election.
Keep in mind, when it comes to this put/call ratio we prefer to be on the same side as the pros (typically it is the pros who play VIX options) so if they are betting on volatility coming down, that’s bullish for stocks.
Take a look at the 21 dma of the VIX put/call ratio. It has really zoomed upward since we looked at it on Sunday. It is now closing in on levels not seen since December 2021. I don’t take this as bearish (even though that time frame was a peak in stocks) because if you look at the chart, we were making lower highs then, and had been for three years. Now it is a higher high we see.
New Ideas
I warmed up to the Transports a few weeks ago and I still like that chart. I have expanded the time frame so you can see the peak in the summer of 2023 that might loom as resistance overhead but today’s rally eked out a new closing high for the year. And no one is talking Transports. Not yet at least.
I also think it is important to note that if Amazon AMZN can get up and over 200 folks will view that as a breakout.
As a reminder, I still like Adobe ADBE and feel as if it is desperately trying to curl under. I would have liked it to fill that gap below but this is the neighborhood I think.
Today’s Indicator
The McClellan Summation Index is still heading down. It needs net breadth of +500 to halt the decline.
Q&A/Reader’s Feedback
Toast TOST broke out of a long sideways move and now has a measured target in the 34 area.
My hope was for the Utes to bounce today and DTE Energy DTE did just that. I suspect it does not make a V bottom but any pullbacks to the 118-120 area I would think are okay to buy. Shorter term resistance is in that 125-126 area. But now that the Utes have corrected I am no longer bearish on them as I was for most of September and October.
DT Midstream DTM has not done anything wrong. It is banging up against some resistance but that’s the worst thing I can say about it.
