Financial Markets Update: Key Action in Facebook Today, & Bullish Signals From Volatility Indices

The volatility risk premium points to a higher market over the next few days, while my technical reading of key stocks in the S&P 500 is bullish. Yesterday's cross-asset action brought several positive factors for US stocks. Copper's chart is signifying global growth. The US yield curve is falling and in the current context that is bullish. But there were also several negative factors across global asset classes. Gold is signalling inflation fears. Inflation expectations are rising based on measures of Treasuries and TIPS. Taken together, expect the S&P 500 to rise moderately over the next few days.

Yesterday evening’s drop in Facebook (FB) is key to watch, as the stock is one of the most reasonably valued in the S&P 500, and its 2nd quarter results were fine (quality of earnings were not an issue, rather guidance re future revenue is moving the stock). I expect FB to recover its losses and added it as a position this morning. My technical reading of the 100 largest firms in the S&P 500 points to 60% of stocks having solidly bullish patterns, while volatility measures similarly point to moderate bullish sentiment. The VVIX indicates modest bullish sentiment as it has returned to low levels after a short spike last week, and the SKEW indicates excessive hedging by bulls. Fixed income volatility measures like TYVIX show low volatility as well. As such I am moderately bullish and expect the market to reach 4429 over the next several days.

I added a position in Facebook (FB) this morning, and my other current positions in the market are long holdings in Korn Ferry (KFY), MKS Instruments (MKSI), Titan Machinery (TITN); and a nearly hedged position (net long) in the SPX (UPRO and SPXU).