S&P500 Futures are coming off their overnight lows as more G20 trade talk headlines help spark another spike to the upside.
Its the last trading day of November and this weeks price action has turned what was shaping up to be another rare red month, into something we've grown quite accustomed to the last few years....
With PowellClause pouring water on the rate hike fire earlier this week , the G20 meeting this weekend, and December coming, we could see a nice rally into years end.
I highlighted some levels we could hit this coming month in my piece yesterday.
Small caps have seen a nice 5 year momentum turn. The last time we had a turn like we saw this month for $IWM was at the lows in 2016.
Emerging markets and China are on the cusp of breaking a year long downtrend.
The one thing we haven't seen on this most recent price recovery has been the customary beat down of the VIX. The VIX remains stubbornly elevated and historically this market has begun rallies to record highs after a pull back with a VIX falling and usually dropping 10-15% in some sessions. On Wednesday with the markets rallying 2.5%+ the VIX was mostly flat on the day! Clearly there is some fear still in this market.
Will a positive outcome at the G20 this weekend spark that VIX sell off?
Stubborn is the only way to put it if you have a bullish perspective on this market. The bears will say that the elevated VIX,despite some nice upside this week, indicates the market is setting up for another decline.
Clearly there are plenty of reasons for this market to fall. The VIX shows a market that is still unsure of what lies ahead. Small caps led this decline, falling first back in early September:
The S&P500 hit new highs before following Small caps lower weeks later. I think it will be small caps to lead this market back up. I also think we won't see much of a rally with the VIX at 15-20. We need to see the VIX start falling. Perhaps that will come today. I think its more likely we get out answer on Monday. I said yesterday that I thought the Powell move would take a few days to digest with the market consolidation. We are getting that now.
Monday will be the most important session we will see the rest of the year. I think that positive G20 outcome will come. However will it be a sell the news event? Or will it mark the start of another strong rally for this market? Stay tuned. For today I expect more of the same spikes and fades that we saw yesterday as the market consolidates for a December to Remember.