Today gave us a good look at the market in the face of vulnerability as the indexes gapped down nearly 1% at the start of the day. This was a good ‘gut check’ of sorts to see if headlines out of Europe would result in a 100-200 point down day. So far, as of 11:15 am est, that doesn’t appear to be the case as the Dow is lower by 33, the NASDAQ 14, and the S&P500 is down 7 to 1,553.
- Financials getting hit the worst — XLF is off the lows but still down 1% so far on the day
- GOOG/AAPL counter trend continues — GOOG is working on a 5 day losing streak while AAPL is going on a 3 day winning streak
- VIX well off the highs — The VIX opened higher by 20% to near 13.50 but has since fallen back down to 12.87 and dropping
Even though today doesn’t appear as bad as it might have been, financials getting hit hard are a definite worry to the bullish trade. XLF has been one of the leaders of the 2013 rally with a year-to-date gain of 11%, and if it starts to downtrend that will certainly be a bearish catalyst for the market. GS & C are the 2 majors getting hit the hardest and both need to hold today’s lows in order to avoid a snowballing of bearish momentum amongst the financials.
One of the great inverse correlations of the last few months has been between AAPL and GOOG. As GOOG has risen to new all time highs, AAPL has been falling to new 52 week lows. Staying true to form, GOOG has fallen 3% the last 5 days while AAPL has rallied nearly 4%. However, timing now seems ripe for this inverse correlation to start working in the other direction. AAPL is struggling to retake resistance at $450 and GOOG is on the verge of a 5th down day in a row and it hasn’t had a 6 day losing streak since March 2011.
“Since falling below 15 again on March 4th, the VIX has fallen 23%, ushering in the all time high/multiple year highs you’ve been seeing in the indexes. I believe we’re entering a new near term range in the VIX where 10-11 marks the lows, and 13-14 marks the highs. While I don’t have an exact time frame for how long I expect this new range to play out, I feel confident in saying I expect to remain within it for the remainder of this month.”
-Stockhaven’s Market Take 3/11/13
Well today saw that range play out perfectly today as the VIX got halted smack dab in the middle of that 13-14 range I alluded too back on March 11th. Today gives me confidence in continuing to expect this range to play out. Moreover, the action today gives me a warning sign to be on the look out for, and that’s a move in the VIX above today’s high. If that happens, you will see today’s move lower turn into more of a legitimate pullback in my opinion. If not though, today simply represents a small hiccup on the way to new all time highs in SPX.
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