VIX at 30: Composure Required
Today’s economic announcements:
No update
Earnings Reports:
- Hewlett Packard
Analysis:
VPOC: 6744.25
VVA: 6736.25 – 6774.25
High-Low: 6715.75 – 6854
PP: 6620
Opening: 6641 (Zone 3)
Vix: 29.26 ⚠️
S&P 500 Trend: Overall bearish sentiment 🔴
On Friday, the S&P 500 opened in the 6815-6830 resistance zone and traded sideways just above it for much of the morning.
From 10:00 AM, sellers took control and pushed the price down to 6750 just before the US open. At the US open, the price tested the 6715-6720 support zone following the NFP data, countered by buyers who pushed the price back up to the 6771-6777 resistance zone. This zone was tested several times without being broken, with the price consolidating between this area and 6750 throughout the day. The price closed down at 6740.
This morning, the S&P 500 opened with a large bearish gap at 6641 amid a sharp increase in oil prices and concerns over Middle East tensions. The index settled on the 6625-6640 support zone before breaking it and rebounding off the 6585-6590 support zone. At 6600, there is significant put option interest, which may have halted the decline after executions, but could accelerate the fall if the price returns to this level. The price is currently trading sideways around the VWAP.
Today, there will be no major economic data, and the focus should remain on the news to monitor the evolving situation while paying close attention to volatility, as the VIX has reached 30.
Scenario 1 🔴: Upon a break of 6600 and confirmation with a break of the 6580 support zone, the price could continue its decline toward the 6550-6560 support zone, followed by 6445-6460.
Scenario 2 🟡: Upon a rejection at 6600, the price could consolidate within the 6600 zone and Friday’s low of 6715.
Scenario 3 🟢: Upon filling the Gap between 6694 and 6740 and breaking the VVAL-1 at 6736, the price could rise toward the 6820-6830 zone, though this would require significant news.
Zones of Interest:
- 6883-6900 (Major resistance zone)
- 6815-6830 (resistance zone)
- 6771-6777 (resistance zone + VVAH-1 6774)
- 6715-6720 (resistance zone + Friday’s low)
- 6693-6740 (Bearish GAP)
- 6625-6640 (resistance zone + open 6641)
- 6600 (Major Put zone)
- 6550-6560 (Support zone)
- 6445-6460 (Support zone)
60-second Chrono
Oil surge and geopolitical tensions
- Energy shock: Oil prices are exploding with a 23% jump for Brent ($114.36) and 27% for US crude ($115.11). JPMorgan anticipates a possible peak at $120 due to the ongoing blockade of the Strait of Hormuz.
- Stalemate in the Middle East: The appointment of Mojtaba Khamenei as Supreme Leader in Iran confirms the maintenance of a hard line, a decision sharply criticized by Donald Trump, distancing prospects for a conflict resolution.
Global stock market plunge
- Asia hit hard: Heavily dependent on energy imports, Asian markets are falling sharply, notably the Nikkei in Japan (-7.5%) and the South Korean Stock Exchange (-8.1%).
- Widespread decline in the West: The shockwave is also affecting Wall Street (Nasdaq futures at -2.5%) and Europe (EUROSTOXX 50 at -3.2%).
The inflation headache for central banks
- Inflationary fears: The risk of a sudden rise in the cost of living is driving up global bond yields (US 10-year Treasuries reached 4.204%).
- Monetary policies threatened: This inflation complicates plans for rate cuts by the Fed and the Bank of England, and could even push the European Central Bank (ECB) to raise rates as early as June.
Rush to the dollar and gold liquidation
- The dollar in strength: In this climate of uncertainty, investors are rushing toward US dollar liquidity, naturally causing the euro and other currencies to retreat.
- Gold decline: Despite its usual safe-haven status, gold is falling by 1.8% (to $5,075 per ounce), as investors are forced to sell it to cover heavy losses sustained in other markets.
Company Forecasts
- Hewlett Packard Enterprise (HPE) expects an increase in revenue driven by demand for its artificial intelligence servers.
- Oracle and Adobe also forecast revenue growth, supported by the adoption of cloud solutions and artificial intelligence tools respectively.
Upcoming Economic Data
- Inflation reports from the United States and Mexico are expected, including the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) price index.
- The economic situation in Canada shows a projected increase in building permits and employment figures.
Other Economic News
- The New York Stock Exchange has been fined for technical issues that disrupted the market.
- BlackRock has limited withdrawals from one of its funds due to high redemption demand.
Macro
Employment: A major shock, the market is contracting violently
Non-farm payroll creations (NFP) (Feb.):
- Actual: -92K
- Forecast: 58K
- Previous: 126K
Unemployment Rate (Feb.):
- Actual: 4.4%
- Forecast: 4.3%
- Previous: 4.3%
-> This is a true macroeconomic earthquake. The closely watched NFP report shows net job losses, a brutal and totally unexpected contraction while the consensus still anticipated growth. Coupled with a rise in the unemployment rate to 4.4%, this confirms that the US economy is no longer slowing down gently: it is braking urgently. The labor market is cracking.
Wages: The inflationary paradox (Stagflation)
Average Hourly Earnings (Monthly) (Feb.):
- Actual: 0.4%
- Forecast: 0.3%
- Previous: 0.4%
Average Hourly Earnings (Year-over-Year) (Annual) (Feb.):
- Actual: 3.8%
- Forecast: 3.7%
- Previous: 3.7%
-> This is the worst possible scenario for the markets and the central bank. While the economy is destroying jobs, wages continue to rise faster than expected. Above all, this proves that inflation remains “sticky.”
Consumption: An engine running out of steam
Retail Sales (Monthly) (Jan.):
- Actual: -0.2%
- Forecast: -0.3%
- Previous: 0.0%
Core Retail Sales (Monthly) (Jan.):
- Current: 0.0%
- Forecast: 0.1%
- Previous: 0.0%
-> The American consumer, representing approximately 70% of the US economy, is showing clear signs of fatigue. Overall sales are in negative territory, and core sales stagnate at 0%, missing expectations. Fear of unemployment and rising prices are pushing households to tighten their purse strings.
Summary
The specter of stagflation: We have here the perfect definition of a nascent “stagflationary” environment: collapsing growth (employment shock, market contraction) combined with resilient inflation (wage increases above expectations). This is absolute poison for corporate margins and, by extension, for equities.
The FED’s nightmare: The Federal Reserve is trapped. On one hand, the disastrous NFP figure screams for the need to intervene to save the economy from a severe recession. On the other, surging wages prevent it from calmly easing its policy. Markets will inevitably short the Dollar and anticipate aggressive rate cuts ahead, as historically, when faced with the choice between saving jobs or fighting the last remnants of inflation, the FED always ends up running the printing press to save growth.
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