STOCKS – AMZN, AAPL, NFLX, ROKU
MACRO – SPY, VXXMike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL
- Update Board 1.20.21 P&G Breakdown, Tesla May Head Higher
- Intel May Jump Following Quarterly Results
- Midday - One Giant Feedback Loop
- Morning Note - Wait For Implied Vol To Break
- Analysis: Netflix Delivers Blockbuster Results
- Midday: The Craziness Continues
- Morning Note – Tailwinds Returning To Equities?
- A Strong Dollar May Crush The Emerging Markets Trade
- Earnings Previews For The Week Of January 18
- T.W.A – Yields Pressuring Mega-Cap Stocks
Stocks rose on January 20, with the S&P 500 gaining about 1.4% to close at a new high, 3,851. Meanwhile, the Qs traded higher to around $323.75. Today's move-up helped to bring the VIX index down to 21.6, which has been the very lower bound of the VIX trading range.
We really need to ask ourselves this question, are we in a new higher implied volatility regime? This is really important because if Vol still has much to fall, then the S&P 500 could see an epic melt-up. If the floor is in the VIX, then a melt-up scenario is less likely, with the better odds being a pullback.
S&P 500 (SPY)
The S&P 500 is nearing the upper end of the trading range, but the RSI is only at 67. So it would not surprise me to see the index push a little bit higher. Maybe 3,870 or so. There is still a good chance for 3950, but it all depends on how fast the market moves higher from here. If it can do so at an orderly pace, then odds for higher 3950 grow better. A lot of that will be determined by where the VIX goes. So this why it is critical to understand the VIX's place. I am beginning to believe we are in a volatility regime change, and VOL will stay higher; you will see why I feel that way as we move forward in this write-up.
Apple rose by around 3% today, but that wasn't all that went up. Call volume surged today, and 30-day implied VOL rose to 41% from 39.5% yesterday.
Amazon rose by more than 4.4% today, and it saw its highest call volume in months, wits it's Implied Vol rising 38% from 37.4%.
Typically, with big moves higher in stocks, you see Volatility come down. Now earnings are next week for Apple and the week after for Amazon. But it seems more likely that on a big up day with heavy call volume rising Implied volatility has more to do with market maker pricing. So, if we stay in this present state of big option trading, volatility will have a tough time come in.
I thought Netflix results were outstanding. The company appears to have turned the operational corner, which managed to get investors to look past the disappointing subscriber growth. The stock finished above $575, which was a huge level of resistance. So this could be a big break out for the stock; it would be ideal for the stock to hold $575 tomorrow. (premium content - Analysis: Netflix Delivers Blockbuster Results - first two weeks free to try, cancel if you hate it!)
Roku did not benefit at all from Netflix, which was surprising. Roku reminds in ways to Tivo, anyone remembers that? Maybe not an exact comparison, but the similarities are there. Anyway, well see..(Should be free to read - Roku: Just When You Thought The Insanity Couldn't Get Worse)
Anyway, that will be all-
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.