Volatility is the name of the game in the markets right now, and yet, is it likely to continue?
There are a ton of interesting market dynamics occurring right now, and a lot of noise as a result. In the last week alone we’ve seen a 10% rally in the S&P 500, a retracement of 2/3rds of that move during the next trading day, and then yesterday, a boring day with a limited range of just over 1% during the market session. The market is giving a little bit of everything.
Before I commit to finding a bullish or bearish setup, I want to review the broad market setup right now, focusing on Tech as a sign for market interest in higher growth names that are more susceptible to tariff risk. So, let’s look at QQQ:
A few key points stand out to me here. First, we’ve obviously seen a great recovery from the lows of last week. Now there’s a key moving average coming into play as we continue to press against the 20-Day Moving Average, but not push through, at least yet. And importantly, the market seems to be stabilizing. At the end of the day, there’s not much clarity here, yet. A move back above $470 would seem crucial to indicate that the most recent tariff news has been digested and the market is comfortable back in the range of Mid-March.
Going further, I want to evaluate the options market to see what people are predicting for the future. The VIX is a great indicator of that, as an index of expected movement over the next month for the S&P 500:
The VIX is sitting at 30 after spiking to 60 on the market’s liquidation attempt. The VIX is about in line with the previous March lows now and indicating that we should not be expecting the wild 10%-type move days. 30% implied volatility indicates a rough estimate of 2% daily expected move in the S&P 500 – which is still a bit wild but feels calm after what we’ve experienced recently.
So, as the market’s fear is dissipating, and VIX is falling, and tech seems ready to move back to a more bullish range, I am looking for interesting bullish setups within tech, and focusing primarily on larger tech companies. And a big one looks very interesting to me right now, PLTR:
Palantir is breaking out above the March highs. AI is still in focus for the market, and PLTR is showing serious relative strength here. While the market is looking to reclaim March lows, PLTR already took care of that. For reference, the day PLTR made its March high (the 25th), QQQ was trading at ~$493 – which would require a roughly 7.5% rally from here.
So, to me, this indicates that the investment community still loves PLTR. The investment community believes in AI. And the technical traders will look to follow suit as they gain confidence in re-allocating capital to this market. Of course, I’ll look at this with options to define the risk and leverage the potential of the bullish trade, as always.
If you want to learn more about utilizing AI for predicting dynamic markets and the incredible opportunities that can be captured utilizing state-of-the-art technological advancements in trade recognition, just send me an e-mail and I’m happy to talk through the leveraged opportunities that I’ve historically identified by combining AI and options analytics!
And as always, please go to http://optionhotline.com to review how I traditionally apply artificial intelligence, technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@OptionHotline.com
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