Sell the Rip, Buy the Dip: VIX Craters, Bearish Omicron News Vanishes

by | Dec 8, 2021 | Stocks

Apparently, all of the underperforming hedge fund bros have boxed up their stuff and hit the bricks… Because the market was ripping Tuesday. So how’s our Fortune Research weekly watchlist holding up?

As a result, the CBOE Volatility Index (VIX) — or “fear gauge” — has plummeted from a new cycle high above 35 back down to 22… threatening to head even lower.

For the uninitiated, a VIX reading of 20 means average volatility of 1% moves up or down each down is expected. The higher above 20, the more volatile the market. The lower under 20, the less volatile.

Source: Bloomberg

Financial media is — of course — covering their respective tuchuses by acknowledging their overreaction to the likely effect of the omicron variant… They’re just doing it in the small print. 

Source: Bloomberg

“Reassess” indeed.

In case we needed some sort of proof that omicron isn’t a big deal, I suppose we could just look at the Johannesburg Stock Exchange (JSE) in South Africa, where cases are spiking.

Since its pre-Thanksgiving low, the JSE is up nearly 10%.

Source: Bloomberg

That’s not bearish at all… If anything, it’s the opposite.

Moreover, preliminary data is showing greater transmissibility but a significant decrease in severity, possibly due to the inclusion of genetic material from the common cold. 

Expert commentary since the beginning stages of the pandemic has touted this equilibrium state as the most likely outcome. That would allow the virus to propagate without destroying its host or taxing our hospital systems, which has been the chief overarching public health concern.

White House Chief Medical Advisor Dr. Anthony Fauci called preliminary data “encouraging,” adding, “although it’s too early to make any definitive statements about it, thus far it does not look like there’s a great degree of severity to it.”

If this gets confirmed over time, that’s fantastic news that should push markets much higher.

My second indicator, however — the volatility of the VIX (yes, the volatility of volatility) — is still pushing up toward 200, which suggests we tread with some caution…

Source: Bloomberg

Your Fortune Research Weekly Watchlist: Dec. 7, 2021

Most of our Fortune Research weekly watchlist was crushing it Tuesday — our FREE TRADE on the Materials Select SPDR Fund (NYSEArca: XLB) was up 3% since our Friday issue, Arch Resources Inc. (NYSE: ARCH) was up 11% versus last week and Petco Health & Wellness Co. Inc. (NYSE: WOOF) was up 11% in just two sessions.

So why not sell a little and then buy something that’s down?

And since literally none of them are down, I’ll add one to the weekly watchlist that is worth a look…

Rivian Automotive Inc. (Nasdaq: RIVN) is an electric vehicle manufacturer focused on the truck and SUV segment of the market.

The company recently made a splash when it was announced it would jointly develop an EV with industry stalwart Ford Motor Co. (NYSE: F). But shortly after its IPO on Nov. 10, that agreement was terminated, and the stock has suffered ever since.

However, Rivian’s R1T all-wheel-drive pickup began production back in September, which is great news from an initial revenue perspective. 

But perhaps more importantly, the company is beginning to deliver on Amazon’s order of 100,000 electric delivery vans to be supplied by 2030.

A prototype was tested in 16 cities earlier in the year, and Amazon expects to have 10,000 of the electric delivery vans in service by the end of 2022.

That means not only will we see first revenue over the next 12 months, but we will see accelerating revenue.

Going to dig more into this one over time, but this looks like a great spot for a FREE TRADE idea.

Keep it small, though… With the VIX still above 20, we aren’t out of the woods just yet.

Updated Fortune Research weekly watchlist below…

 

Source: Bloomberg, Fortune Research

All the best,

Matt Warder

Fortune Research

WRITTEN BY<br>Matt Warder

WRITTEN BY
Matt Warder

What to read next

Have any questions? Contact Our Customer Service Team