Well, it looks like the day before yesterday’s implied volatility ramp higher came back to bite the market yesterday. The early IV crush in the VIX 1D went from 21 to 11, sending the S&P 500 surging by almost 1% to start the day. But by day’s end, it was all gone, with the index closing the day flat, at 0%.
As markets turn focus to the Fed's preferred inflation gauge, the PCE data, here are key charts to watch to prepare for the day ahead.
1. Nasdaq 100's Attempt to Cross Resistance
The NASDAQ 100 finished the day down 13 basis points and dropped about 1.5% from its highs of the day in the final hours of trading.
They tried for a second day to get over resistance at 19,475 and failed again. All the Nasdaq needs to do today is to fill the gap lower, below support at 19,250, and probably on its way to filling the gap from August 24 at 19,000.
2. S&P 500's Lackluster Price Action
In addition, despite all the hype at the start of the week about the billions a day that Systematic funds were supposed to buy, the price action hasn’t been awe-inspiring yet. Looking at the MACD, with a 20 and 120 value, it almost seems as if they might have to start selling again if the S&P 500 begins to move lower.
3. 1-Day Volatility Index - IV Crush Fades Away
I don’t think yesterday’s afternoon sell-off had to do with today’s PCE. The VIX1D closed the day under 13, down from yesterday’s close of around 21. So, yesterday’s decline had more to do with the morning’s IV crush fading away as normal trading took over, and Nvidia (NASDAQ:NVDA) sank to the lows of the day.
4. Nvidia Stock at Key Support
The selling in Nvidia was on autopilot for almost the entire day, a slow mechanical move lower. Then, around 2:30, the sellers decided to stop messing around and took Nvidia down.
Nvidia managed to close on technical support around $118. However, breaking that level could lead to a further drop to around $110. It is also back below its 50-day moving average and below its 10-day exponential moving average.
5. 10-Year Rate Lingers at Key Support Levels
Meanwhile, the 10-year rate seems to be waiting for either the PCE report or the job report next week, but this level at 3.8% remains incredibly important.
A break of support could likely trigger a much steeper drop and, more importantly, another move lower in USD/JPY.