Peak Uncertainty
Premium Section: Financials (XLF), Germany (EWG) & India (INDA)
The stock market is dealing with a lot of uncertainty going into tomorrow’s FOMC meeting. To add fuel to the fire, there is speculation that the US could possibly get involved in the situation between Israel and Iran. How did investors react?
Investors bought downside protection as the VIX spiked almost 13% today. The VIX is now in an uptrend above the 9 EMA (green) and 21 EMA (yellow).
What is more interesting is that investors and traders were willing to pay up to buy Put Option protection as the Options Skew spiked.
The S&P 500 (SPY) closed below the 9 EMA (green) today and looks poised to retest the 21 EMA (yellow) at $592. Note that this is also where the Volume Profile Point of Control is and the POC often acts like a magnet. There are still Net New Highs, so trading individual stocks is still favorable. However the McClellan Breadth Oscillator shows bearish divergence, hinting that the next move could be down. The MACD is also making a bearish crossover, telling us that bearish momentum may be picking up.
The NYSE Advance/Decline Line got rejected at the Upper Bollinger Band and moved lower. With RSI and MACD making a bearish divergences, be prepared for a sharp downside move over the next few days.
The Nasdaq 100 Stocks Above the 20 SMA ($NDTW) has moved out of overbought territory and is heading toward the oversold zone near the 20 level. It’s about halfway there. When $NDTW reaches that oversold area, it would present a favorable risk-reward setup for new equity positions.
On the bright side, downside may be pretty light going into the latter half of June. Dumb Money appears to be holding their equity exposure as Smart Money begins re-accumulating.
The Fear & Greed Model appears to be forming a “Greed Grind” where greediness holds sideways in the Extreme Greed zone instead of falling lower. This can also minimize the downside.
Looking at the Seasonality chart, the SPY tends to bottom around June 27th before heading higher for the Independence Day rally, which typically lasts until July 17th. This reminds us to not get too bearish and look for investments to buy during the upcoming pullback.
We’re finalizing our 3Q2025 Cycle Forecasts, which should be available for purchase before the end of the month.
In the Premium Section, we’ll cover Financials (XLF), Germany (EWG) and India (INDA).
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