S&P 500
The S&P 500 finished on a high note Friday but could not erase the week’s loss finishing lower by 2.2%. The rally that came late on Friday had much more to do with the long weekend and the decay of implied volatility than anything else.
The index closed below resistance at 3,830 despite attempting to break above on several occasions in the final 20 minutes of the day. For this rally to have any legs the week of July 5, the S&P 500 will need to gap above 3,830 today.
There also appears to be a Head And Shoulders pattern in the S&P 500 chart. Which would suggest the index re-fills the gap at 3,670.
The most significant headwind will come on Wednesday afternoon when the FOMC minutes for the June meeting are released at 2 PM ET. The markets have tended to react negatively to the Fed minutes all year, and this Wednesday’s release may prove not to be all that different.
VIX
The VIX index slid lower all day on Friday, suggesting that implied volatility levels were dropping as the value of puts fell, which helped push the S&P 500 higher into the end of the day.
VVIX
The VVIX also moved lower, suggesting the implied volatility of the VIX was dropping. It is now at the lowest point since January 2020 and indicates that it is still cheap to be buying put options.
Financial Conditions
The IEF/LQD ratio closed on Thursday and Friday above that key resistance area of 0.92 that had held three prior times. A rising ratio would suggest that financial conditions are starting to tighten again and are likely to make a meaningful move higher from here.
It may also indicate that the volatility is about to move much higher, as the VIX and IEF/LQD ratios tend to have a strong relationship.
AMD
Advanced Micro Devices (NASDAQ:AMD) fell sharply last week to a significant support level at $73.70. That level of support has been vital for the stock going back to July 2020. If that level breaks, the stock will likely fall for around $59.
NVIDIA
NVIDIA (NASDAQ:NVDA) may be foreshadowing the next move in AMD, with NVIDIA dropping below support at $153, which means that the next region to look for in the stock comes around $135.
Taiwan Semiconductor
Taiwan Semiconductor Manufacturing (NYSE:TSM) has also broken down, dropping below support at $78. It looks similar to AMD, with a big gap to fill down around $68.
PayPal
PayPal (NASDAQ:PYPL) continues showing positive momentum trends, with an RSI still pushing higher. Meanwhile, the stock remains in a falling wedge pattern and waiting to see if it can break out to the upside and move back to about $82.
Roblox
Finally, Roblox (NYSE:RBLX) is also showing positive trends, with an RSI that has broken above resistance and a stock price that is testing resistance at $35. If the stock can clear $35, there is a solid path to the stock pushing higher to around $45.
