Weekend Recap: A Look at the US Indices, Yields, and the $VIX

I wish I had a novel insight to provide for you this weekend, but I haven’t much to add. My basic thought on $ES remains intact: I don’t believe this move is finished, and it is a bit of an open question as to just how high it might go and how long it might take from here before a retracement. It might drift in an upward trajectory for a while (noted here) but a case can also be made for it go significantly higher, too (noted here).

And though I have some confidence that $ES hasn’t finished rallying, I have less clarity regarding the other indices. In this last post on the indices, I gave upward targets, and they have all been met, or exceeded, so I don’t have much to say for the moment that is decisive. But regardless, I’ll walk through them each in turn here just to have some assessment of them together all in one place again.

1. My primary assumption for $ES for the moment is that it will tend up and to the right, finishing a series of fours and fives to complete a first aggregate impulse wave. I will do my best to try to identify those fours and fives if they do, in fact, materialize. Of interesting note is that if we do get the arc, it may also give us the appearance of a double top as it crests, so we can anticipate, even now, how the bear argument may not immediately fade from view.

ES

2. $NQ, last discussed here, did essentially what I expected it to. We got the trend line strike that I was expecting. And interestingly, it’s also poking through it now, so we may consider the downtrend broken. I don’t have a great target for this (I will explain why below), but if it’s also formed a nest, we may expect it to challenge the old highs. The strength from here to there will be discussed below, because it’s an open question for me.

NQ

3. $RTY, much like $NQ, also last discussed here, effectively reached its expected target, at least on a minimum basis. It of course may go higher still, but from here, I will need to observe more structure before I can insist on that. Like the comment on $NQ just above, I will make a point about this below, after the index charts.

RTY

4. And finally, $YM, like the others, reached the target I had generated for it, based on the inverse I observed here (same broad post from before that I keep linking to).

YM

I feel like I’m clearer right now on the S&P, and less clear on the others because of this: last discussed here, the 10-yr yield has effectively done what I was expecting. The slope of the ascent slowed, and we’re now approaching the trend line above, but I’m not quite sure what to expect from here and that injects ambiguity into the Naz/Russell/Dow relative performances. As the $10YRYLD reacts to the trend line, it will affect the rate sensitive indices differently. If yields slice right through the trend line, then back test it, we would expect the bank-heavy Russell to outperform the Naz at first. But yields could also initially reject this trend line and retrace, before making another go at it, in which case we would expect the Naz to outperform the Russell at first. And that’s the part I really don’t know.

10YRYLD

None of this is to say that I expect one of the indices to collapse while the others pump: I think if we’re going up, they will all sort of arc upwards together. It’s just that I feel like it’s better for me to say less here specifically about the other indices rather than more, until I see some more structure. What we do know is the $VIX seems to me to have given us a good sign: after multiple failed breakouts, we may now consider the super dangerous Sven Wedge™ essentially invalidated, a subject discussed previously here. That said, we are approaching a long-term trend line below us (green) and so volatility may not necessarily go entirely away, though I think the darkest possibility has been virtually dismantled.

VIX

I hope everyone has had a good weekend.


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