Week of 5/1

Recap: Bearish theme continues in the global markets. Bulls were hoping that good tech earnings would save the market, however earnings and outlook were mixed with NFLX, AMZN, GooG disappointing while FB, APPL, MSFT and TSLA managed to show good numbers. Market is showing characteristics of a bear market and every bounce on any positive news seems like a selling opportunity. Bulls have lot of defending to do and it seems all big buyers are on a hiatus. 

For the week

SPX: - 3.27%

COMPX: - 3.93%

DOW: -2.47%

IWM: -4.01%

VIX: +18%

Our proprietary breadth indicators show that two stocks are down for every stock that's up. Oscillator at negative 111 shows trend is to down side and this can go to an extreme of -270. Also the percent of stocks above 40 and 200dma is around 27 and 28 which is not an extreme level yet. At extremes these can go to 4% and 5% respectively indicating 96 to 97% of stocks are below those moving averages. Those extremes usually mark a temporary bottom. In addition the SPX gamma and Vix gamma are negative suggesting more volatility ahead and to down side. 

SPX (Monthly): 

SPX Weekly: 

SPX Daily: 

COMP (Monthly): Clearly tech stocks have taken the brunt of this selling with yields rising. April saw a drop of 14% as Fed became more hawkish in its stance and talked hiking rates aggressively. Even though there has been only one rate increase, markets have been nervous and have been selling off aggressively ahead of Fed rate hike cycle and rising inflation.

COMP (Weekly): 

COMP (Daily):

Dow (Monthly):

Dow (Weekly):

Dow (Daily)

Russell (Monthly):

Russ (Weekly):

VIX:

Outlook: With Fed rate decision next Wednesday, markets will see more volatility until Wednesday. Analysis of indicies suggest there is more downside to this market probably another flush down scenario before we hit some oversold conditions. We are still in a bear market as all rallies are being sold. One must be prudent not to try to get long at these levels especially when Vix is at these elevated levels and gamma is negative.

Expecting some good buying opportunities to emerge post Fed if we do get a flush down when Fed asserts more hawkish tone. Maybe markets here are front running Fed to get them less hawkish.