COMBING THRU DATA – LOOKING FOR CLUES ABOUT VOLATILITY, USD & STOCKS – April 25, 2022
We are now seeing that major economies (US/UK/Japan) are not immune from global deleveraging and inflation. As investors seek safety in the US Dollar this may eventually trigger a broader and deeper selloff in U.S. stocks and market volatility will begin to pick up as the VIXY moves up. As the USD continues to strengthen corporate profits for US multinationals will begin to disappear.
VOLATILITY MAY HAVE BOTTOMED SETTING THE STAGE FOR A TREND HIGHER
Volatility is beginning to pick up as we see the VIXY moving up strongly from its 6-month base.
Utilizing multiple time frame analysis and then focusing on the 4-hour chart we were able to capture the volatility low earlier than we would have by only using the daily, weekly, or monthly chart.
VIXY – PROSHARES TRUST VIX SHORT-TERM FUTURES ETF: 4-HOUR
THE USD IS UP VS ALL OTHER MAJOR CURRENCIES
The US Dollar is continuing to appreciate as investors and central banks seek safety from geopolitical, inflation, and other market dislocations. The low in the USD was made on January 6, 2021.
1 YEAR RELATIVE PERFORMANCE (USD) – WWW.FINVIZ.COM
UUP – INVESCO DB USD INDEX BULLISH FUND ETF: DAILY
STOCKS MEET RESISTANCE AND ARE SLIPPING AGAIN!
Stocks hit resistance the first week of 2022 after hitting a Fibonacci iteration of 2.1618. Less than two months later the SPY found support at yet another Fibonacci number of 1.618. These Fibonacci levels are based on the range calculation of the pre-Covid high and the Covid March 2020 low.
However, after rallying from the 1.618 level the SPY rolled over to the downside as it hit a 72-bar (12-day) Bollinger Band using a standard deviation setting of 1.618.
Now we will watch closely to see if the price will make a new low for 2022 which may confirm a shift in the overall trend in stocks.
SPY – SPDR S&P 500 ETF TRUST: 4-HOUR
INVERSE ETFS OFFER AN ALTERNATIVE TO TRADITIONAL BUY AND HOLD
Astute traders who want to do more than liquidate part or all their stock holdings may want to consider investing in an inverted ETF. Inverted ETFs provide the ability to take advantage of a downturn in the stock market without the complexities of having to sell individual stocks short.
If our goal as a trader is to make money, we need to adapt and be as agile as necessary. This is one of the reasons why our team continually tracks global money flow according to each country’s stock index but additionally other types of markets and asset classes. Our quantitative trading research is crucial in determining which markets to trade and how to efficiently employ trading capital.
Since we reviewed the SPY uptrend and the potential for a change of trend to the downside; it’s only appropriate to view the opposite side of this trade by looking at the SH inverted ETF.
SH – PROSHARES SHORT S&P 500 ETF: 4-HOUR
Author: Chris Vermeulen