Monday started off with weakness in Asian and European markets, U.S. futures looking down and three major signs of late-summer 2021 stock market volatility appearing on my radar.
The market has been exhibiting toppish signs — when things appear to be reaching a top in prices — for a few weeks. I expect a volatile Wall Street later in the summer and a big upswing in bearish moves in the fall.
Like I said in Monday’s video, the fall of Afghanistan to the Taliban will trigger a huge geopolitical risk-off market.
Investors will realize that U.S. foreign policy has a ton of failures and weaknesses, which could open the door for other black swan events such as China taking over Taiwan.
Afghanistan is a massive mining center, so this event could lead to China looking to create an alliance with the Taliban. At the top of Chinese President Xi Jinping’s list is to take control of the semiconductor hub center that’s in Taiwan.
The alliance could eventually allow China to take over Taiwan as a result.
And that’s why I’m looking at this chart almost every day and expecting late-summer 2021 stock market volatility.
The CBOE Volatility Index (INDEXCBOE: VIX), aka the volatility index or fear gauge, has a tendency to pop up after making new lows. Last week, we saw the VIX sink to lows at the 15 level — which was last seen in July before we had an uptick back above 20.
A reading of 20 is considered average volatility. Anything less is considered weak and the higher you get, the more volatile the market.
I expect the next flare in the VIX to challenge 30, which could lead to a 5% to 10% correction in the S&P 500.
A move above 30 later this fall could see real carnage in the markets… Traders must be prepared!
But late-summer 2021 stock market volatility isn’t the only thing investors should prepare for this week.
Late-Summer 2021 Stock Market Volatility and Important Earnings
Walmart Inc. (NYSE: WMT) reported earnings Tuesday morning, exceeding Wall Street’s expectations.
But is this a surprise? No.
This is a company that flourished under COVID-19 and has seen a big shift of its consumer shopping strategy to online e-commerce.
I view Walmart as the quintessential American retailer that captures the mood of most of America — a bellwether if you will.
If pricing pressures via inflation are hurting the average American, then we’ll see it in Walmart earnings and, most importantly, its forward guidance.
Home Depot Inc. (NYSE: HD) also reported Tuesday — beating expectations — and is up 24% this year due to the white-hot housing market and Americans spending extra cash on home improvements. The main theme I’m interested in here is if the housing boom is more of a one-off event based on the extra stimulus check money that won’t continue…
NVIDIA Corp. (Nasdaq: NVDA) reports earnings after the bell Wednesday, and it’s the backbone of a lot of exciting technology. Its semiconductor chip products are used in everything from gaming consoles and crypto to autonomous cars.
This stock will be a bellwether for how market prices grow. I expect it to beat its number easily. However, whether or not the stock will rip higher is the real question. If it does, then this rally in growth stocks has more room to run.
And don’t forget that we will also get the Federal Open Market Committee (FOMC) minutes on Wednesday, which details the conversations of the Federal Reserve from its last meeting.
Oftentimes, the market reacts more to the minutes than the actual meeting itself. It could be especially true this week as things are jittery from any talk of tapering the Fed’s bond-buying frenzy.
The chorus is growing to stop the bond buying, i.e. tapering, as most investors blame the huge increase in inflation on the Fed’s constant money printing. The minutes will show there are serious concerns about inflation within the Fed, and the kicker will be if Chair Jermone Powell actually agrees.
Be sure to share your thoughts about upcoming my prediction of late-summer 2021 stock market volatility in the comments section below.
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