The market sentiment seems to have shifted towards growth-related macro data rather than inflation risk. This change in focus could be attributed to the fear of a US recession or a hard-landing scenario, leading investors to prioritize economic growth indicators over inflation trends. The recent softer US retail sales data may exacerbate these concerns and spark fears of another recession in the near future.
The VVIX/VIX Ratio and Potential Volatility Spike
The rise of the VVIX/VIX ratio indicates a lingering uncertainty in the US stock market. While the implied volatility of the S&P 500 (VIX) has decreased in recent weeks, the higher-order implied volatility of the VIX (VVIX) has declined at a slower pace. This discrepancy has led to an increase in the VVIX/VIX ratio, signaling a potential for another spike in volatility in the market. Such spikes have historically preceded corrective declines in the S&P 500, highlighting the continued risk of heightened volatility.
Technical Analysis of the Nasdaq 100
From a technical standpoint, the Nasdaq 100 has been displaying signs of exhaustion in its short-term bullish momentum. The minor uptrend phase is showing a bearish divergence condition on the hourly RSI momentum indicator, indicating a potential reversal in the near future. If the key short-term resistance level at 19,230 is not breached, the Nasdaq 100 faces the risk of a corrective decline towards intermediate support levels at 18,680 and 18,435/310. However, a breakout above 19,230 could invalidate the bearish scenario and pave the way for further upside towards intermediate resistance levels at 19,600 and 19,900.
The Nasdaq 100 is facing a period of uncertainty driven by a shift in market focus towards growth-related macro data, the rise of the VVIX/VIX ratio, and technical indicators pointing towards a potential reversal in momentum. Investors should closely monitor key economic indicators, volatility ratios, and technical signals to gauge the future direction of the Nasdaq 100 and make informed investment decisions. The current landscape presents challenges but also opportunities for those willing to navigate the uncertain waters of the stock market.