Why stock bulls are sitting on their hands again: Morning Brief – Yahoo Finance

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Thursday, December 8, 2022
Today's newsletter is by Jared Blikre, a reporter focused on the markets on Yahoo Finance. Follow him on Twitter @SPYJared. Read this and more market news on the go with Yahoo Finance App.
What a difference a week makes.
Last Wednesday's Powell-fueled risk rally that landed the S&P 500 on top of its 200-day moving average for the first time since April has now been fully reversed and then some.
What was an upside breakout is now a failed upside breakout. A declining moving average ready to be rejected has again become a declining moving average that must be respected.
This, along with five straight days of declines in the S&P 500, now resets expectations about what Santa may or not deliver into year-end.
Sometimes in trading, patterns become obvious with hindsight — patterns that inform a host of woulda-coulda-shoulda trades which nearly perfectly reflect and predict price action over a period of time.
Along these lines, the CBOE Volatility Index — a/k/a the VIX — has provided a beautiful roadmap for trading the major indices in 2022.
A simple system emerges: buy the the S&P 500 when the VIX surges above the 35 level — indicating a relative amount of fear — and sell the S&P 500 when the VIX dips below 20, indicating relative complacency among investors.
And though the VIX tends to move inversely with the direction of the S&P 500, it's rare to see a mean-reverting pattern play out this cleanly over the arbitrary time frame of one calendar year.
In the context of a market that is shifting from one looking for excuses to move higher into a market looking for reasons to remain range-bound, this emerging VIX-to-S&P relationship makes sense.
Of course, it's not as though anyone could have (or would have) predicted on January 1, 2022 that this pattern would emerge. Or that this relationship would emerge at these particular levels. Sell at 20 and buy at 35 are retro-fitted thresholds in the VIX. In life and in markets, hindsight remains crystal clear.
Nevertheless, with the latest "VIX sell" signal becoming a confirmed winner, it makes sense to prepare for the next potential "VIX buy" signal that could emerge and think about how that plays out around some of the important levels in the S&P 500.
A surge in the VIX back above 35 after a bout of selling in the stock market would no doubt get the attention of traders and algos the world over. But there's no way to predict where the S&P 500 would be trading at that point, or how long it will take to get there.
However, by way of recent comparison, it took about six weeks for the VIX to travel from 20 to 35 the last go-around — during the market sell-off that ran from mid-August to early October — which would point to a potential buy early in the new year.
Failing any signal clarity with the VIX, the S&P 500 could flash a bullish signal by simply reclaiming its 200-day moving average to the upside. This would likely (but not necessarily) occur in confluence with a simultaneous close over its 2022 negative trend line (the red line in the first chart), which would strengthen the signal.
The U.S. dollar could also add clarity, but it simply continues to consolidate under its 200-day moving average after last week's breakdown.
All in all, it's looking like another waiting game for S&P 500 bulls as the latest signal melts into noise. Next week's inflation reads and Fed meeting might clear that up. Or just add volume to the current market broadcast.
Economy
8:30 a.m. ET: Initial Jobless Claims, week ended Dec. 3 (230,000 expected, 225,000 during prior week)
8:30 a.m. ET: Continuing Claims, week ended Nov. 26 (1.618 million expected, 1.608 million during prior week)
Earnings
Broadcom (AVGO), Chewy (CHWY), Ciena (CIEN), Costco Wholesale (COST), DocuSign (DOCU), Domo (DOMO), Hello Group (MOMO), lululemon athletica (LULU), National Beverage (FIZZ), RH (RH), Vail Resorts (MTN)
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
Related Quotes
The White House plans to announced a $36 billion allocation to the Central States Pension Fund.
More than a third report they’re in a worse financial situation than last year.
(Bloomberg) — The Federal Reserve hasn’t had much success so far in wrestling down sky-high inflation, but its monetary tightening campaign is having a major impact in deflating asset bubbles that swelled during the pandemic.Most Read from BloombergPutin Calls Russian Nukes Deterrent Factor, Says War Risk RisingPeru’s President Accused of Coup After Move to Dissolve CongressWNBA Star Griner Released in One-for-One Swap for Arms DealerWhy Did So Many US Men Quit Working? Social Status May Hold t
Sam Bankman-Fried's ambition for celebrity endorsements might have snared the "Anti-Hero" singer, but she proved to be smarter than a lot of other famous people.
U.S. stocks rose Thursday morning as investors attempted to stymie this week's losing streak across equity markets from stretching into another day as rate jitters and recession chatter hamper a seasonally bullish period for Wall Street.
Retirement-eligible salaried employees at Ford were warned about retiring this year to maximize a lump sum pension payment.
What can you invest in with a Roth IRA? What constitutes a prohibited transaction? Here’s what you need to know to get the most out of your Roth IRA.
NEW YORK (Reuters) -Oil prices fell on Thursday on the prospect of a key Canada-to-U.S. crude pipeline that shut after a leak returning to service soon, putting a hefty amount crude back into the market at the same time that global economic slowdowns raised fuel demand fears. Brent crude lost 67 cents, or 0.9%, to $76.50 a barrel by 11:29 a.m. EST (1629 GMT), while U.S. West Texas Intermediate (WTI) crude shed 17 cents, or 0.2%, to $71.84. Oil prices rose after the company announced the closure of the line, which was shut at about 8 p.m. CT Wednesday (0200 GMT Thursday), but the market has since changed its sentiment.
GameStop chairman Ryan Cohen and CEO Matt Furlong promised to turn the gaming retailer into one of operational excellence.
Yahoo Finance Live anchors Akiko Fujita and Rachelle Akuffo discuss reports that Airbnb will restrict unauthorized New Year’s Eve parties.
Earlier this year, in May, claims were made that Microsoft Corp co-founder Bill Gates owned the majority of America’s farmland. While that is false, with the billionaire amassing nearly 270,000 acres of farmland across the country, compared to 900 million total farm acres, a different billionaire privately owns 2.2 million acres, making him the largest landowner in the U.S. John Malone, the former CEO of Tele-Communications Inc., which AT&T Inc. purchased for more than $50 billion in 1999, has a
Twitter Inc has been hit with another lawsuit stemming from the recent purging of half its workforce, this one accusing the social media company of disproportionately targeting female employees for layoffs. The proposed class action filed late on Wednesday in San Francisco federal court said that after Twitter was taken over by Elon Musk, the world's richest person, it laid off 57% of its female workers compared to 47% of men. Twitter laid off roughly 3,700 employees in early November in a cost-cutting measure by Musk, and hundreds more subsequently resigned.
(Bloomberg) — The rally in US stocks has brought valuations to levels where they no longer price in a contraction in earnings, posing a risk to the recovery, according to Citigroup Inc. strategists.Most Read from BloombergPutin Calls Russian Nukes Deterrent Factor, Says War Risk RisingPeru’s President Accused of Coup After Move to Dissolve CongressWNBA Star Griner Released in One-for-One Swap for Arms DealerWhy Did So Many US Men Quit Working? Social Status May Hold the Key, Study SaysElon Musk
Not many S&P 500 stocks have enough oomph to jump 500% in five years. But a handful show it's more than possible.
The rollercoaster ride continues in the stock market, and equities have been falling across the board this week. The S&P 500 is down 3.5%, and the Dow has lost some 870 points. The market drop was fueled by uncertainty; recent economic data has been unexpectedly positive, and it’s clouded the forecast for the Fed’s interest rate decision next week. The central bank’s twin mandates, to rein in inflation and to moderate unemployment, frequently run counter to each other, and with inflation running
The highly-disliked cable and internet giant is making a move that's going to anger some subscribers.
Worried about the prospect of a recession coming next year? Well, that sounds like a mild scenario, if Michael Burry’s prognosis is anything to go by. The investor whose famous bet against the US housing market was documented in “The Big Short,” thinks a ‘multi-year recession’ is potentially in the cards – and one more severe than currently expected. This statement follows previous warnings regarding the economy, such as predicting last year that the ‘mother of all crashes’ is coming, while also
In the upcoming holiday film on Lifetime, Kirk Franklin’s The Night Before Christmas, Power star Naturi Naughton stars as Journee, mother to her estranged daughter Nia, played by Lorea Turner.
U.S. stocks [flickered between gains and losses Wednesday](https://www.wsj.com/articles/global-stocks-markets-dow-update-12-07-2022-11670414349). **As of around midday in New York:** The S 500 slipped 0.2%. The Dow industrials were about flat. The Nasdaq Composite shed 0.5%. The 10-year US Treasury yield fell to 3.462% from 3.512% late Tuesday as bond prices rose.
Investors can buy low cost index fund if they want to receive the average market return. But in any diversified…

source