Weekly Wisdom: VVIX Makes A New YTD High

Greetings fellow traders and welcome to your March 16th edition of Weekly Wisdom: Levels to Know and Moves to Look For!

Let's get to what we're currently seeing in these crazy markets and what we have our focus on going forward.

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Taking a look back on this week, March 13 - 17:

• This past week has been extremely volatile to say the least! $VVIX made a new year low just last Thursday at 73.60. The $VVIX then turned around and rallied hard, closing up at 92. The following day, last Friday, $VVIX continued its sharp move to make new highs up at 126, breaking the high level we made when $SPX bottomed last October - a very extreme move! $VVIX made further YTD highs on Wednesday of this week up at 137.
• $VIX followed suit with the $VVIX move, staying above the year lows made in early February and breaking out last week from the 18s to a high of 30.81 on Monday. $VIX then made a low for the week just above 22 on Tuesday and has remained between 22 - 30 since.??
• $SPX futures had a hard fail with the $VVIX breakout last week, dropping from 4050 to a low of 3839 this past Monday. We have since been making a bounce attempt toward 4000 as the $VIX products cool off their breakouts.?
• Rates have remained volatile with all the drama - the 2-year yield backed off sharply from the high of 5.08% to a low of 3.72% in just 2 weeks. $TNX, the CBOE 10YR Yield, dropped from 4% back down to 3.4%.

Here's what we are eyeing next week, March 20 - 24:

Level Highlights:

• Now that volatility has broken out, bulls need to be tactical with chasing strength. $SPX futures have put a solid low in at 3839 but have suffered a weekly breakdown. Bulls will need a close above 4086 to negate the weekly breakdown. 4000-4050 should serve as a resistance zone on the way up. Bulls now have a support zone of 3900-3850 to defend as we have found buyers under 3900 this week.
• $VVIX above 100 leads to volatility expansion and $VIX rising. Bulls are watching for $VVIX to drop back below 100 and then below this recent Tuesday low of 93 for an eventual downtrend back into the 80s. Bears will look for the 95-105 zone hold for support before another turn higher.??
• $VIX has broken out but ran into resistance above 30. Bulls want to see that 30 be it for all this market drama, with a bleed back lower below 22 (the recent low) and eventually back into the teens. Bears want to see 22-20 support hold for a possible move into the mid 30s or even higher.

Upcoming News:

• Tuesday, March 21 Canada will report their CPI and Core CPI numbers at 8:30 a.m. ET. Then we’ll get February existing home sales data for the U.S. at 10:00 a.m. ET.
• Wednesday, March 22 is the big day next week as the Fed releases its latest rate decision and Chairman Powell holds a press conference. The volatility for this rate decision has been sky high with calls for a 0.50% raise just a couple of weeks ago changing to now a possible either 0.25% raise or no raise at all. The rate decision comes out at 2:00 p.m. ET followed by Powell’s presser at 2:30.
• Thursday, March 23 the UK gives their official bank rate update at 8:00 a.m. ET. Then we’ll get weekly unemployment claims at 8:30 a.m., followed by February new home sales at 10:00 a.m.??
• Friday, March 24 we’ll get durable goods orders m/m and core durable goods orders m/m at 8:30 a.m. ET. We’ll also get the flash services PMI and flash manufacturing PMI at 9:45 a.m.

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Here's Your Chart of the Week:

Via Morgan Stanley Research, Bloomberg:?The regional bank turmoil has tightened up financial conditions a bit as well as lowered the peak Fed Funds terminal rate - however as you can see, overall financial conditions are still much easier than they were when the markets made lows in October last year

Source: https://twitter.com/WallStJesus/status/1635760769261240322/photo/1

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SPY Daily Update:

$SPY daily chart is working on a nice rebound after the weekly breakdown / $VIX breakout. 397, 400, and 405 are resistance levels above - bulls ultimately need to get a close above 400 to get out of the penalty box here.

SPY Weekly Update:

$SPY weekly chart has suffered a breakdown but is working on a nice recovery so far. Technically speaking bulls need to have a close above last week’s open to negate that candle, which would be a $SPY close over 405.

Don't miss our next live event on LinkedIn, Senior Trader Derrick Oldensmith will be joining the next edition of Conversations With A Pro Trader on March 29. Register now!

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-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 2:00pm ET March 16, 2023

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