The VIX Sounds a Siren to Seek Shelter

The Market

If you have ever heard me speak, then you know I am a native New Yorker, as my accent, despite leaving New York City more than thirty years ago, remains quite strong. Having grown up in New York, tornadoes were something that happened ‘out west’, so I was unfamiliar with them.

On the East Coast of the US, we are much more familiar with hurricanes. Hurricanes develop over days. The weather people can track them, and they follow a path much more slowly. One can prepare for a hurricane or at least try to.

Now I live in St Louis, where we do get tornadoes on occasion. Just about a year ago, we had an EF-3 come right through the city. Sunday’s weather was glorious. But today (Monday) has been rife with tornado warnings. As of the market close, there have already been two full-fledged tornado watches/warnings in my area today. We get piercing sounds on our phones, the sirens in the neighborhood go off, and if you look outside, the weather often appears okay, not dire.

But once the alarms go off, we are urged to go to an inside room or the basement. And it often feels like a scramble. No preparation. Just go. Because they happen so fast and are over in a matter of minutes.

I share this weather report with you because for the last several days the market feels as though it is sleepwalking. It feels oh so calm. It feels like it is on a glide-path. It has felt very much like our gorgeous weather on Sunday.

Yet the VIX remains well above where it was in December. Heck, it remains well above the levels it was through last summer. As I think about the mad scramble to go to the basement already twice today, I can’t help but wonder if the VIX is telling us there could be a bout of volatility later this week. Just enough to shake things up.

I don’t think the VIX is poised to go on a full-fledged run—no EF-3—just a few sirens going off that cause us to go to the basement. If the VIX’s DSI was low (it is currently 32) I would think more of a storm coming, but with it not low, I’m just thinking a warning. Because I continue to think that pullbacks will lead to another rally.

New Ideas

I want to follow up on Tesla (TSLA) , a stock I have been asked about often lately. It did rally off the support and oversold condition in early April, but it stopped at resistance. However, it has now pulled back to test the downtrend line. It ought to rally again.

Today’s Indicator

The 30-day moving average of the advance/decline line is still not overbought. It is no longer oversold (obviously) but not yet fully overbought.

Q&A/Reader’s Feedback

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I have not been a fan of the drugs for a while now, and XLV’s (XLV) chart is no exception. Should it break this 142-ish area, then I think the mid 130s is in play, and I would expect it to get oversold somewhere down there (call it 136-138) since there is a measured target around 136. If it doesn’t break this 142 area, then it would show improvement, but it has the feel that it would like to break.

Energy Fuels (UUUU) hangs in there, but those old highs remain elusive. I’ll say that as long as it holds the 17-18 area, it gets the benefit of the doubt, but mostly it looks like it’s trapped between 17-ish and 27-ish.

I keep wondering if (TLT) is making a little bottom, and it keeps doing absolutely nothing. I think support in the 84-85 area is strong. If it breaks, that are I’d get very concerned.

I really thought McDonald’s (MCD) would hold that 300-302 area and rally. It did so for two days, and now it has died, which means I am very wrong. It is getting very oversold down here (290-ish), so I’d look for a short-term rally at the very least.

Berkshire Hathaway (BRK.B) has been terrible since February, but step back and see that it has spent most of the last year in a wide trading range. Earnings are out this weekend, but it ought to have a rally attempt from these lows. The question I have is if it can cross that downtrend line. If it can, then the trading range continues.