Stocks finished the day lower, with the S&P 500 falling by around 65 bps. There was nothing overly exciting about Wednesday, just a run-of-the-mill pullback at this point, which couldn’t fill the gap from Tuesday’s opening.
But we need to remember that things will dramatically change starting on Friday, when quarterly rebalancing is over, reality sets back in, and that is around the economy, inflation, and the Fed. Then things will heat up into the release of the FOMC minutes next Wednesday.
That means we will likely see a VIX that starts to rise from here and has bottomed as traders look to put hedges back on, sending the S&P 500 down. The VIX at 19.3 is pretty much as low as it has been in some time and is now at the lower end of the channel.
Russell 2000 ETF
Yesterday, the Russell had a pretty bearish move after testing significant resistance at 2,140, then trading lower and going below all of the previous highs at 2,100. The Russell will need to rebound quickly on Thursday. Otherwise, the index is likely heading significantly lower.
NVIDIA
The gamma squeeze in NVIDIA (NASDAQ:NVDA) is over, and the stock also broke its mini uptrend. I think this will be trading sub $265 very soon, and probably much lower than that.
Micron
I had thought Micron Technology's (NASDAQ:MU) results were good from what I had initially read. But I guess they weren’t good enough. The stock traded up to $86 only to close at $79, a nearly 9% Intraday swing.
The region between $75 and $77 seems critical for what happens next. My only thought of what I initially saw would be around the CAPEX, but I need to reread it; I haven’t had enough time.
Dollar
Finally, we need to keep a close eye on the Dollar Index. It looks like a triple top has formed and is now very close to confirming the pattern. A drop below 97.75 will be bad news for the index and the Fed’s fight against inflation.
