I hope everyone enjoyed Friday's Halloween scare. $SPY closed down 2.90%, $QQQQ down 2.68% and the $VIX spiked 24%! SPY and QQQQ both violated the 50 day moving average and SPY killed a channel support level. The sell off heightened fear and raised premium in the options market, reflected by the volatility index (VIX). After QQQQ broke through a rising wedge it is now sitting on a channel. It could blow through that as well. To me the June highs look supportive for a correction, but there are minor areas of support that could bring whipsaws.
Transports (IYT) and
Small Caps (IWM) predicted this action recently, as well as hints from
Hong Kong (HSI) and the
US Dollar ETF (UUP) (click links for explanations). Also my recent post on the volatility of volatility, which was very high relative to historical and the underlying, could have been predicting this VIX move. Current 10d historical volatility doubled in a week from 70% to 150% from ivolatility.com. So there was very interesting action this week and I'm not surprised. Below are 6 month charts w/ technicals of SPY, QQQQ and the VIX and news articles that could have been catalysts.
QQQQ (Nasdaq ETF) - FreeStockCharts.com
VIX (Volatility Index ) - FreeStockCharts.com
From the Fed 10/30/09:
1) Federal Reserve announces temporary exemption to the limitations in section 23A of the Federal Reserve Act will expire on October 30, 2009 (
Federal Reserve link).
2)Federal Reserve adopts policy statement supporting prudent commercial real estate (CRE) loan workouts (
link) ht/
zerohedge.
News:
U.S. Stocks Drop on Economic Concern as New Home Sales Decline (
Bloomberg)
U.S. Stocks Drop on Decline in Consumer Data, CIT Threat (
Bloomberg Video)
Fed Ends Treasury Buys That Capped Rates, Stabilized Housing (Bloomberg)
