VIX goes up; the market goes down; VIX goes down; the market goes up. It tells us there is no confidence in this market, and the options market is firmly in control, just bouncing the S&P back and forth between support and resistance.
I don’t think much of this decline has to do with the debt limit. First off, I couldn’t imagine the debt ceiling not being lifted. Second, the dollar index has been rising. If people are worried about the debt limit, why is the dollar going up? Shouldn’t it be falling? Plus, bond yields have hardly even moved. So let’s forget about this debt limit thing; if the market rallied Wednesday because of the debt limit potentially being extended, then it is likely to sell right back off today. The recent decline has nothing to do with the debt limit, although it makes for great headlines.
Anyway, the pattern on Wednesday looked very much like the pattern on Oct. 1. So does it mean we get a repeat of the past couple of days and head lower again today? It certainly could. There is a gap that needs to be filled at 4,435.
Walmart (NYSE:WMT) has been holding on to support around $135, and while the stock has likely not yet bottomed, it probably is due for a short-term bounce higher back to $142.
Intel (NASDAQ:INTC) looked very weak, and the stock was likely to head lower in the future. Earnings growth for this company will be hard to come by over the next year, and that means even at 12 times forward earnings, the stock isn’t cheap. It probably could see a PE that falls to around ten over time. I would not be surprised to see it break the uptrend and fall to $47.
Adobe Systems (NASDAQ:ADBE) is another stock that is oversold currently, with an RSI below 30. Like Walmart, it probably hasn’t bottomed yet, but it is due to rebound and fill the gap back to $604.
I guess we will see what today brings again. At this point, it is anyone’s guess.