Groundhog Day
Why Markets Feel Stuck Right Now
I have a confession: I really don’t like Groundhog Day.
It horrifies my cinephile friends, but films that repeat the same scene over and over just don’t do it for me. (Yes, I gave Memento 1.5 stars on Letterboxd — don’t @ me.)
Which is why the market feels painfully familiar right now.
6850 has been on repeat all year. SPX ping-ponging in the same broad range for months. Every breakout fails. Every breakdown fails. Bears get loud at the lows. Bulls scream at the highs.
Boring.
But there’s one adage I keep coming back to: from contraction comes expansion.
And unlike Groundhog Day, this loop won’t last forever.
Pressure is building. Range is tightening. Energy is storing.
A big move is coming.
The only question is — which way?
It’s Not All Bad
Whilst it’s super frustrating waiting for the broader indices to resolve, there’s plenty happening under the surface keeping the dream of a short squeeze in play.
For starters, IWM is coiling below a key Fibonacci extension with the MACD looking like it wants to resolve higher - all above an upwardly mobile 50dma.
ARKK - a key metric for risk sentiment - refuses to resolve its ominous topping pattern.
And everyone's favorite 'canary down the coalmine' KRE - regional banks - continues to hold above the key breakout level of $70, extended above an upwardly mobile 50dma.
So why are we stuck?
Seasonality? Maybe.
Iran? Possibly.
Rate cuts? I hear you.
There’s plenty for markets to be worried about right now, but for me the simple reason we’re treading water boils down to two things.
First, tech is lagging.
I won’t go into much detail here because you’ve heard it all already - but the topline summary that the MVPs are sitting on the bench, all whilst the laggards (looking at XLP here) are catching a bid - pretty much sums up why the markets continue to tread water.
If they step back onto the field, there’s your short squeeze.
NVDA earnings next week, anyone?
If NVDA breaks the range to the upside, game on. If it breaks lower - then it’s super difficult to imagine SPY or QQQ staying afloat much longer.
Until then, Groundhog Day. Sigh.
Next up is the VIX - which has remained in an uptrend since December and simply refuses to die.
It’s been the cleanest short-term trading tell in months:
Calls at resistance. Puts at support. Rinse. Repeat.
Frustrating? Yes.
Profitable? Also yes.
It’s a similar story of VIX futures too...
Buying calls above 1.0 (when VIX flips into backwardation) has worked well as a contrarian signal.
Each spike, bears scream crash - and buyers hit the gas.
Right now, we’re hovering around 1.0 - a clear risk-off signal. But when that shorter-term downtrend rolls over, calls have tended to pay.
Until the channel breaks, I’m playing the range. Again, you do you.
Wen Moon?
Nobody knows which way this resolves.
But if contraction truly leads to expansion, what happens next won’t be a small move.
You can front-run it and get chopped up like everyone else - there’s plenty of that going around right now.
Me? I’m sticking to the charts.
Because here’s the difference between this market and Groundhog Day:
In the movie, Phil wakes up to the same song every morning.
In markets, the music eventually changes.
And when it does, you don’t want to still be brushing your teeth to yesterday’s script.
The loop will break.
The only question is whether you’re positioned for the moment it does. And whether you have enough cash on the sidelines, ready to deploy.
Best,
Alex