Small caps (IWM) retreated 0.54%, with the QQQ down 0.23%, which was more than the SPY at 0.14%. That’s the first time in a while that’s occurred.
What really caught the eye was the chart of the UVXY. This leveraged ETF tracks 1.5x volatility.
UVXY hourly chart
Take a look at the two points I’ve noted. This is where price began closing hourly above a bunch of previous candles. That’s usually a sign of bullish behavior. It’s been over a month since that’s happened.
This could be indicating that volatility is returning, which would be bad for equities. You can’t really see the same concept on the VIX clearly.
VIX hourly chart
But, you do see it on the VVIX.
VVIX hourly chart
In fact, we’ve continued to make a nice uptrend in the VVIX. Since the VVIX measures volatility (option demand) on the VIX, it’s clear traders are buying options on the VIX. Since the VIX is already at lows, they’re obviously buying more calls. That means they expect volatility to expand, which is bad for equities.
Crude’s amazing reversal
If you didn’t catch the crude rally, don’t worry…I didn’t see it coming either. The crude reversal actually caught a lot of traders off guard. Take a look at the crude oil futures chart (futures trade round the clock except from 5-6 p.m. est).
Crude oil futures daily chart
Notice how there was a clear trendline supporting the market that crude broke below. It then rallied hard to take back all the losses in one day. Then it closed above the entire consolidation range the next day.
That’s extremely bullish. When you see two candles of equal size like that together, it’s something to pay attention to. Taken in this context, along with the subsequent day, it makes me believe crude could be breaking higher from here.