Simpler Sentiment – Weekly Wrap-Up 2/17/17

Equities continue to climb higher with new all-time highs set this week, but there are some odd cracks being seen.

The S&P 500 climbed to a new intraday high of 2351 and we are set to close out the week just a few points lower at 2347. The Russell 2000 is just shy of 1400 after hitting 1405 on Wednesday. The Nasdaq 100 is looking at new closing high, right now at 5315.

The VIX, however, is up on the week. It currently sits at 11.63 after almost hitting 13 on Thursday. The odd action really came on Wednesday when both the VIX and SPX climbed sharply together. This was apparently due to a particular Fund that trades volatility and options. Here is the news (https://www.bloomberg.com/news/articles/2017-02-16/catalyst-capital-says-don-t-blame-us-for-stock-market-swings ) and here is an interesting look at volatility trading (https://www.bloomberg.com/view/articles/2017-02-17/volatility-trades-and-explosive-shorts).

The $6 billion fund seemingly lost 15% over the week and unwound some large positions, which some see as moving the market – and volatility – higher. These types of things happen from time to time. And thankfully a fund of this size doesn’t have the global impact that it once did (see LTCM).

Our Market Barometer was very bullish for the week and that played out nicely. For next week our traders largely remain cautiously optimistic, though not necessarily long the indexes.

Henry: I’m going to focus on individual names knowing SPX could have that healthy pullback, but ideally FB, NFLX and AMZN would continue to hold up. The Nasdaq still acts great, and I’m looking for those pieces of it to continue to perform well.

Chris: I think that with StockTwits sentiment so bullish, the SPX goes to 2300.

Tucker: The S&P 500 has paused the past two days. However, the uptrend is still strong. We may see a pullback in the uptrend, which is very common in a large move. However, there are not any signals yet to get short. Use the pullbacks as opportunities to get in long at a discount.

David: The trend depends on the timeframe. The move up from February still appears incomplete, but that doesn’t mean we couldn’t see a hundred point pullback in the S&P 500 when the leg up from November runs out of gas. It doesn’t appear to be quite ready yet, but it might be getting toward the latter stages where it gets choppier and has more pullbacks on the way up. Sustained action below 2320 might warn of a bigger pullback to find better support in the 2225 – 2275 area. Without a clean break, it’s unwise to get too bearish, but it’s tough to add new bullish positions here.

Doc: I see nothing on the charts that indicate the current strong uptrend should not continue. Pullbacks and short term corrections will certainly appear at a any point but I’m not shorting in this scenario. Use the pullbacks to get on the major trend.

Neil: Still bullish here but looking at next week to add a lower levels – buy the dip opportunity with the option expiration behind us.

Chris McKhann

Chris McKhann

Chris McKhann has been involved professionally with the stock market for more than 15 years and specifically with derivatives for 12 of those. He started as a stock broker, but quickly moved on to options and futures trading. He spent some time as the Derivatives Product Manager for TD Ameritrade. He was the chief analyst and hedging strategist for OptionMonster. He has been an options trading educator and content provider for many years. His writing and analysis has been featured on Reuters, the Wall Street Journal, Forbes, TheStreet, CNBC and internationally. He has also designed and traded option and futures strategies for prop trading firms and hedge funds as well as managed accounts.

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