Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Apr 24, 2018 at 2:25 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview

Ford Motor Company (NYSE:F) will be the first car company to step up to the plate this earnings season, with the Detroit-based automaker scheduled to report first-quarter earnings after the close Wednesday, April 25. Ahead of the event, options activity has been bullish, despite the stock's troubling post-earnings history.

Ford stock has produced a negative earnings reaction in six of the last eight quarters. In January, the stock dropped 4% the day after earnings, and gave back 1.1% following its report last April. In the last two years overall, the equity has averaged a 3.1% move the day after earnings, regardless of direction. This time around, the options market is pricing in a larger-than-usual 4.8% one-day move, per implied volatility data.

Looking closer at the charts, Ford stock has already shed almost 11% in 2018, and at last check was down 0.4% to trade at $11 today. After hitting an annual high of $13.33 on Jan. 16, the shares pulled back to near the $10 level, and recent breakout attempts have been thwarted by the 200-day moving average.

Ford Stock Chart

The options pits paint a bullish picture, though. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 4.60. Not only does this show that bought calls have outnumbered puts by a nearly 5-to-1 ratio, but the reading ranks 3 percentage points from a 52-week high, pointing to a healthier-than-usual appetite for bullish bets of late.

Digging deeper, the weekly 4/27 11.50- and 12-strike calls saw notable increases in open interest during this time frame. According to data from the major options exchanges, most of the activity at these strikes has been of the buy-to-open variety. But considering how far out of the money these calls are, and the fact that short interest rose 16.4% in the previous two reporting periods, some of this activity could be from short sellers using options to hedge against a post-earnings rally.

Published on Apr 24, 2018 at 9:55 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

GrubHub Inc (NYSE:GRUB) stock is trading higher, after D.A. Davidson raised its price target to $100 from $80. This comes just after the Sohn Conference kick-off, where Li Ran from Half Sky Capital said that GrubHub "is the leading online food delivery platform in the U.S.," and waxed optimistic on the firm's North American growth potential, particularly among millennials. Further, Ran's upside target for GRUB stock is $160 per share -- a more than 55% premium to the current stock price.

GrubHub shares are currently up 0.8% to trade at $103.01. GRUB stock has picked up nearly 200% over the past year, touching a record high of $112.41 on March 13. Since then, the equity has taken a breather, but found support atop its rising 50-day moving average.

There's room for more upbeat analyst attention, too, as the average 12-month price target of $102.45 is a discount to GRUB's current price. Plus, the majority of analysts maintain "hold" or "strong sell" ratings, meaning GRUB could enjoy upgrades in the near future.

Short interest on GRUB rose 18% during the most recent reporting period, and now represents 21% of the stock's total available float. At GrubHub stock's average daily trading volume, it would take just over a week for the shorts to cover their bearish bets. That's plenty of fuel for a potential short squeeze to send the stock to higher highs.

The security's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.83, which ranks in the 82nd percentile of its annual range. Though the ratio indicates that short-term calls still outnumber puts on an absolute basis, the elevated percentile indicates that near-term traders have rarely shown a greater preference for GRUB puts over calls in the last year. An exodus of option bears could also fuel the security's fire.

Lastly, those who have bought premium on GRUB stock have been consistently rewarded over the last 12 months. The stock's Schaeffer's Volatility Scorecard (SVS) of 93 out of 100 indicates that GrubHub shares have easily exceeded options traders' volatility expectations in the past year.

Published on Apr 24, 2018 at 9:59 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Home improvement stocks Home Depot Inc (NYSE:HD) and Lowe's Companies, Inc. (NYSE:LOW) are both trading higher this morning, after Wells Fargo initiated coverage with an "outperform" rating, and set its price targets on the retail stocks to $205 and $100, respectively. The brokerage firm believes broad macroeconomic factors will be a boon for both HD and LOW, and said the former is at an attractive entry point and the latter is poised to gain market shares. 

Short Sellers Have Abandoned Home Depot Stock

At last check, Home Depot stock was up 0.9% to trade at $179.33. The $205 price target sits in territory the equity has not seen since its Jan. 29 record high of $207.61. Although the shares recently turned in their worst quarter in years, the pullback appears to have been contained by their 200-day moving average. Overall, HD has added 18% in the past 12-months.

Plenty of HD short sellers are abandoning ship. The 8.85 million shares sold short is down by half since mid-September, and short interest fell by 20% in the most recent reporting period. A continuation of this short-covering activity should provide more tailwinds for the equity.

Options Traders Grow Bearish as Lowe's Stock Churns

Lowe's stock is up 0.7% to trade at $84.50. Similar to Home Depot, LOW stock shot to a record high of $108.98 on Jan. 25, and then promptly reversed course amid the stock market correction. Since a late-February bear gap, the equity has traded within a tight range just above the $84-$85 area, which coincides with the stock's 200-day trendline and its year-over-year breakeven mark.

In the options pits, put buying has picked up in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows LOW with a 10-day put/call volume ratio of 0.96, a ratio that ranks in the 93rd percentile of its annual range.

Meanwhile, those who have bought premium on LOW stock have been consistently rewarded over the last 12 months. The stock's Schaeffer's Volatility Scorecard (SVS) of 86 (out of 100) indicates Lowe's shares have easily exceeded options traders' volatility expectations in the past year.

 

Published on Apr 24, 2018 at 10:12 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Options Recommendations

Since early August, shares of satellite TV provider Dish Network Corp (NASDAQ:DISH) have experienced a sharp downtrend. The stock is already down roughly 22% in 2018, and historical data suggests the recent encounter with the 40-day moving average could be a bearish signal, too. While this technical outlook alone could warrant the attention of contrarian bears, the sentiment backdrop is even more brow-raising.

180420dish

 

For starters, the long-term underperformer still sports seven "strong buy" analyst ratings. What's more, the average price target stands all the way up at $64.72 -- a roughly 74% premium to current levels. There is a real possibility for future downgrades and/or price-target cuts to come through and pressure DISH lower.

Also, the stock failed to benefit from a notable decline in short interest during 2017, pointing toward its underlying technical weakness. And with short interest back on the rise in recent reporting periods, bears could only be emboldened by the technical weakness, which could add to the selling pressure on the security.

Dish Network's Schaeffer's Volatility Index (SVI) is attractive, too, as this reading of 42% ranks in the bottom one-third of readings in the past year -- hinting at lower-than-usual volatility expectations for near-term options.

Subscribers to Schaeffer's Weekend Trader Series options recommendation service received this DISH commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.
Published on Apr 24, 2018 at 10:32 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update
  • Buzz Stocks

The shares of drugmakers Incyte Corporation (NASDAQ:INCY) and Epizyme Inc (NASDAQ:EPZM) are getting crushed this morning, as the stocks react to Food and Drug Administration (FDA) buzz. What's more, analysts are cutting their price targets on INCY and EPZM stocks -- both of which could be vulnerable to additional bearish brokerage attention.

INCY Stock Eyes Worst Month in Years

An FDA panel last night recommended the regulatory body not approve a higher dose of baricitinib, an arthritis drug developed by Incyte and Eli Lilly (LLY). As such, INCY stock is down 4.6% to trade at $65 -- within striking distance of its two-year low of $61.30, touched on April 9.

It's been a brutal month, in particular, for Incyte shares, which have shed 22.2% already in April -- set for their worst month since January 2016. The equity gapped lower to start the month, after the company ended the study of its cancer drug, epacadostat, used in combination with Merck's (MRK) Keytruda.

In the wake of the FDA panel recommendation, SunTrust Robinson cut its price target on INCY shares to $75 from $80. There could be more price-target reductions on the horizon for the drug stock, too, as the average 12-month price target of $81.31 represents a premium of more than 25% to INCY's price. Meanwhile, 13 out of 18 analysts maintain "buy" or better opinions on the shares, leaving the security vulnerable to potential downgrades.

EPZM Stock Plummets On FDA Hold

Meanwhile, the FDA put a partial clinical hold on new enrollments for Epizyme's trial of key cancer drug tazemetostat, after a pediatric patient developed secondary T-cell lymphoma. EPZM stock is among the worst of the Nasdaq this morning, down 14.1% at $13.15. The shares are now testing a trendline that's connected a series of lower highs since late 2016, and are set for their lowest close of 2018.

In the wake of the halted tazemetostat trial, Wedbush and SunTrust Robinson both cut their price targets on Epizyme shares to $20. Again, additional price-target cuts could be coming for EPZM, as the consensus of $24.78 represents a whopping 87% premium to the equity's current price. In the same vein, eight of nine analysts following the drug stock maintain "strong buy" or "buy" opinions.

Published on Apr 24, 2018 at 10:38 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Analyst Update

Shares of Dynagas LNG Partners LP (NYSE:DLNG) plunged 8.4% last Wednesday, April 18, after the energy transportation company cut its quarterly dividend in order to generate long-term cash flow. Today, however, Wells Fargo downgraded DLNG stock to "underperform" from "market perform," and slashed its price target to $6 from $13, saying the move may not be enough to overcome "liquidity hurdles."

In reaction, DLNG shares have plummeted 3.8% to trade at $9.13, hitting a two-year low of $8.49 out of the gate. This recent price action just echoes the stock's trend over the past 12 months, with Dynagas down 46% year-over-year. What's more, the equity has failed to capitalize on rising oil prices, shedding nearly 10% so far in April, even as crude futures boast a 5.9% month-to-date gain at this point.

As such, embattled Dynagas stock is at risk for more downgrades and/or price-target cuts, which could exacerbate the equity's troubles. At last night's close, two of six analysts maintain a "buy" rating on DLNG -- with not one "sell" on the books -- while the average 12-month price target of $12.69 is a 41% premium to present trading levels.

Although currently on the short-sale restricted (SSR) list, more selling from shorts could keep pressure on DLNG stock. Though short interest jumped 11.7% in the most recent reporting period to 430,000 shares, these bearish bets account for just 2.2% of the stock's available float.

Published on Apr 24, 2018 at 11:49 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
  • Technical Analysis
  • Earnings Preview

Boeing Co (NYSE:BA) is scheduled to report first-quarter earnings before the open tomorrow. The aerospace giant will hope to avoid the fate of sector peer Lockheed Martin (LMT), which is lower today despite an upbeat earnings report. Ahead of the event, options traders are flocking to BA calls, hoping for a repeat post-earnings performance. 

BA stock has a strong earnings history, enjoying a positive earnings reaction in six of the last eight quarters, including a 4.9% pop in January. In the last two years overall, the equity has averaged a 3.9% move the day after earnings, regardless of direction. This time around, the options market is pricing in a larger-than-usual 6.4% one-day move, per implied volatility data.

A move of similar proportion would put Boeing stock back near the $360 level for the first time since its late-February record high of $371.60. Since then, however, the shares pulled back, although the dip was contained by their ascending 100-day moving average. At last check, BA was up 0.9% to trade at $342.10 today, recently reclaiming the 50-day moving average, as well. 

Boeing Chart April 24

The security has seen plenty of call buying in the options pits lately. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the 10-day call/put volume ratio of 1.33 ranks in the elevated 71st percentile of its annual range. 

Shifting gears to today, call buying continues to ramp up. Over 22,000 calls have changed hands, double the expected amount and volume is pacing for the 94th percentile of its annual range. New positions are being opened at the weekly 4/27 355-strike call, the most popular contract today. 

With earnings imminent, Boeing found itself on a list of stocks with a high Schaeffer's Volatility Scorecards (SVS) that report earnings soon. Boeing's SVS of 92 (out of 100) indicates the stock has regularly made bigger moves on the charts over the past year, compared to what the options market was expecting. 

Published on Apr 23, 2018 at 2:11 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Indexes and ETFs
  • Quantitative Analysis
  • Editor's Pick

General Electric Company (NYSE:GE) stock was among the best of the Dow Jones Industrial Average (DJI) last week, punctuated by the conglomerate's stronger-than-expected earnings report on Friday. On the flip side, Apple Inc. (NASDAQ:AAPL) stock was among the worst blue chips last week, amid concerns about the iPhone and ebbing smartphone demand. It was a definite role reversal for the pair of blue chips, sending up a signal we haven't seen yet in 2018. Here's how the Dow tends to perform when GE stock leads and AAPL lags.

GE Looks to Snap Monthly Losing Streak

Specifically, General Electric stock gained 7.8% last week -- its best since the week of the November 2016 presidential election. For perspective, just last month, GE shares touched an eight-year low of $12.73, but are now trading at $14.60 -- back above their 60-day moving average for just the second time since June. Further, the blue chip is pacing for an April gain of 1.1%, set to snap its dismal monthly losing streak.

ge stock chart

Apple's Worst Day Since February

Apple stock, meanwhile, fell 5.2% last week, and on Friday slid 4.1% -- its worst day since Feb. 2. AAPL shares are now trading around $165.00, set to end beneath their 200-day moving average for the first time since the February correction. However, the $164-$165 area previously acted as a ceiling for Apple stock in late 2017, but switched roles to contain a recent pullback. It also represents a 10% discount to the equity's March 13 record high of $183.50.

apple stock chart

Biggest GE/AAPL Difference in At Least 8 Years

The last time that GE stock was among the top three Dow components for the week at the same time AAPL stock was in the bottom three was Sept. 22, 2017, according to Schaeffer's Senior Quantitative Analyst Rocky White. In fact, this "Freaky Friday" has happened just nine times since 2010, and last week's difference was the biggest of all.

GE-AAPL signals since 2010

'Freaky Friday' Could Spell Gains for Dow

These signals have been bullish for the Dow index in the past. Although the DJI was down 0.66%, on average, one week later, the blue-chip barometer was up an average of 2.01% one month (four weeks) out. Further, the Dow was higher 88.9% of the time. That's more than double the index's average anytime one-week gain of just 0.84%, looking at data since 2010, with a win rate of just 65.3%.

Further, three months after GE and AAPL stocks lead and lag, respectively, the Dow was up 5%, on average! Again, the index was higher all but once, or 88.9% of the time, and that was back after the March 2010 signal. For comparison, the index sports an average anytime three-month gain of just 2.85%, with a win rate of 73.2%.

dow after ge-apple signals

dow returns after ge-apple signals

Published on Apr 23, 2018 at 2:47 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview
  • Technical Analysis

Travelers Companies Inc (NYSE:TRV) is scheduled to report earnings before the open tomorrow, April 24, and the stock has been testing a key level on the charts ahead of the event. Specifically, TRV shares have pulled back to the $135-$137 area. The $135 price point equals a roughly 10% decline from the equity's Feb. 2 record high of $150.55, and is around the year-to-date breakeven point. Just above here, located near the $136.50 level, is a 38.2% Fibonacci retracement of the rally from the September low to February peak.

travelers stock today

As you can also see on the chart above, a sharp intraday drop back on April 6 was neatly contained by the 160-day moving average. Travelers stock was last seen trading up 0.5% at $137.55, giving it a year-over-year lead of 15.6%. Recent post-earnings performances suggest more upside could be coming, too.

For example, TRV shares gained 5% after earnings last quarter, and added 2.4% the day following earnings the quarter before that. Implied volatility data shows the options market is pricing in a swing of 3.3% for tomorrow's session, regardless of direction.

Speaking of options, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 783 TRV calls were bought to open over the past 10 days, compared to just 26 puts. However, the largest increase in open interest during this time occurred at the May 140 call, and most of the positions were sold to open -- suggesting traders foresee the security holding below $140 over the next month or so.

Published on Apr 23, 2018 at 3:06 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move

The broader stock market has erased its modest lead ahead of this week's onslaught of corporate earnings reports. Among individual stocks to watch are aluminum giant Alcoa Corp (NYSE:AA), Bowflex parent Nautilus, Inc. (NYSE:NLS), and homegoods retailer Pier 1 Imports Inc (NYSE:PIR), which are all seeing wild price action. Here's a quick look at moving shares of AA, NLS, and PIR.

Rusal Extension Levels Alcoa Stock

Alcoa stock has plunged 13.9% to trade at $51.64 -- its worst day since the company split back in October 2016 -- after the U.S. Treasury Department extended the deadline to Oct. 23 from June 5 for Americans to end business dealings with Russian aluminum firm Rusal as part of a broader set of sanctions imposed on Moscow. Additionally, the Trump administration is reportedly considering easing sanctions on Rusal if Oleg Deripaska gives up control of the company.

This price action marks a sharp reversal from AA stock's recent trajectory. In fact, the shares were up more than 33% for April heading into today's trading, and hit a post-split record high of $62.35 last Thursday after earnings -- prompting Deutsche Bank this morning to boost its price target to $70 from $60.

Alcoa is now down 4.4% year-to-date, though, and one group of traders is likely kicking rocks. Short interest fell 22.7% in the two most recent reporting periods to 6.86 million shares -- the fewest number of bearish bets since Nov. 1.

Nautilus Stock on Track for Best Day Since August 2016

Craig-Hallum initiated coverage on Nautilus with a "buy" rating and $19 price target -- a level not seen since last July. The brokerage firm said new product launches should help spark growth, and called NLS a "compelling investment opportunity." In reaction, NLS stock is trading up 11.2% at $14.95 -- pacing for its best day since Aug. 2, 2016, and its first close north of its 200-day moving average since July 27.

More broadly, the action among analysts has been mixed. At last Friday's close, three brokerage firms maintained a "strong buy" rating, versus three others that issued "hold" recommendations on the stock. The average 12-month price target, meanwhile, is docked at $16.22, a lukewarm 8.9% premium to current trading levels.

Pier 1 Imports Stock Plummets After Downgrade

Pier 1 Imports stock is down 9.7% to trade at $2.39, earlier hitting an eight-year low of $2.37. Sparking the sell-off is a downgrade to "underperform" from "market perform" at Raymond James, which said to "exit the shares now" before management begins executing a strategic initiative that will likely not create growth until 2021.

PIR stock is now staring at a 66.4% year-over-year deficit, and short sellers have started cashing out of their winning bets. Short interest fell 18.6% between the March 1 and April 1 reporting periods to 11.09 million shares. This still represents a healthy 14.8% of the retailer's available float, though.

Published on Apr 18, 2018 at 12:37 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Strategies and Concepts
  • Earnings Preview

We're heading into the heart of earnings season, which could create several potentially profitable trading opportunities. Among those getting ready to unveil their quarterly results are oil-and-gas names NRG Energy Inc (NYSE:NRG) and Suncor Energy Inc. (NYSE:SU). Both energy stocks have exceeded options traders' volatility expectations over the past year, and with short-term implied volatilities relatively low right now, it could be a prime time for pre-earnings premium buyers to strike.

NRG Energy Stock Has a Recent History of Positive Earnings Reactions

NRG Energy is slated to report first-quarter earnings before the market opens on Thursday, May 3. The stock has averaged a next-day gain of 4.3% after the company's last two quarterly events -- in line with the stock's average one-day move over the past eight quarters, regardless of direction.

The equity's trend is certainly to the upside right now, up 71% year-over year. More recently, NRG stock has added 1.5% to trade at $31.72, and hit a three-year high of $31.78 earlier amid surging oil prices.

Monthly May options are remarkably cheap right now, per the stock's Schaeffer's Volatility Index (SVI) of 32% -- in the 9th annual percentile -- which could make it easier to maximize the benefits of leverage. Plus, NRG's Schaeffer's Volatility Scorecard (SVS) is docked at a lofty 92 (out of a possible 100), meaning the equity has tended to make outsized moves over the last 12 months, relative to what the options market has priced in.

Suncor Energy Stock is Trading Near New Highs Ahead of Earnings

Suncor Energy will report first-quarter earnings after the market closes next Tuesday, April 24. Despite suffering a 3% post-earnings loss back in February, the stock has a history of positive earnings reactions -- closing higher the next day in six of the past eight quarters, averaging a gain of 2.2%.

SU stock had a rough start to 2018, but since bouncing from the $31.50-$32.00 region in early March -- a 38.2% Fibonacci retracement to its rally in the second half of 2017 -- it has gained 22.3% to trade at $38.48. What's more, the shares topped out at $38.58 earlier today, their highest mark since September 2014.

And even with the uncertainty of earnings looming, SU's SVI of 25% is ranked in the 5th percentile of its 12-month range, suggesting low volatility expectations are being priced into short-term contracts. What's more, the oil stock has consistently rewarded premium buyers over the past year, per its elevated SVS reading of 92.

Published on Apr 18, 2018 at 12:57 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Indexes and ETFs
  • VIX and Volatility
  • Editor's Pick

The Cboe Volatility Index (VIX) -- also know as Wall Street's "fear index" -- yesterday ended lower for a sixth straight day, and closed beneath its lower Bollinger Band (BB) for the first time since August 2016, or 425 trading days ago. That marks the longest streak above its lower BB ever, going back to 1990 (as far as we have VIX data), according to Schaeffer's Senior Quantitative Analyst Rocky White. Here's what that could mean for the VIX and the S&P 500 Index (SPX) in the near term.

First, there are a lot of signals different traders utilize with the Bollinger Band indicator, but there are three especially popular ones: when an index or equity's price goes above the upper BB, a trader will often view it as being "overbought"; when the price goes below the lower BB, as we saw yesterday with the VIX, a trader will often view that as being "oversold"; when the bands contract and become very narrow, some traders use that as a signal that volatility may soon increase.

Stocks Slumped After Last 2 Signals

As alluded to above, you'd have to go back to August 2016 for the last VIX break of its lower BB. Prior to that, the "fear gauge" breached its lower BB in June 2015. Both of these technical signals preceded weakness for the stock market over the subsequent three months. Specifically, the S&P fell 4.32% after the 2016 break, and dropped 8.54% after the 2015 break. Below is how the SPX performed after the VIX broke its lower BB for the first time in six months.

SPX after VIX breaks lower BB

On average, the S&P 500 has modestly outperformed one and two weeks after these signals, gaining 0.36% and 0.46%, respectively. That's compared to average anytime one- and two-week gain of 0.17% and 0.33%, respectively, looking at data since 1993 (when the first signal occurred). However, one month later, the SPX was up a weaker-than-usual 0.56%, and three months out, the index was up just 1.07% -- about half its average anytime three-month gain.

spx after VIX signals vs anytime

VIX Nearly Doubled After August 2016 Signal

Meanwhile, the last two signals have preceded dramatic rallies in the VIX itself. After the August 2016 break, the volatility index skyrocketed 93.85% in the subsequent three months. Following the June 2015 signal, the VIX surged 85.3%.

VIX after first BB breaks in 6 mos

If past is prologue, the VIX could surge in the near term. A week after previous signals, the fear index was up 3.77%, on average -- more than three times its average anytime one-week gain of 0.86%, looking at data since 1993. Two weeks out, the VIX was up a massive 10.06%, on average, compared to just 1.37% anytime. Three months later, the volatility gauge was up 18.12%, on average, and higher 69.2% of the time. That's compared to an average anytime three-month gain of just 4.62%, with a positive rate of 45.6%.

VIX after signals vs anytime

VIX Discount Also Notable

Meanwhile, it's also worth noting that on Monday, the VIX discount -- which measures the difference between when spot VIX retreats south of the 20-day SPX historical volatility, indicating lower short-term volatility expectations are being priced in -- fell to negative 30%. Further, we had a VIX discount for 10 straight sessions -- something we haven't seen since late February, and prior to that since July 2016.

On average, and counting just one signal every 21 days, the S&P 500 dropped 2.73% two months after these signals, according to Schaeffer's Quantitative Analyst Chris Prybal. On the flip side, the VIX gained an average of 11.12%.

'Wrong Way' Speculators Could Limit VIX Upside

Nevertheless, Schaeffer's Senior V.P. of Research Todd Salamone said he still finds it "encouraging for stock market bulls that the historically 'wrong way' large speculators in the weekly Commitments of Traders (CoT) report have a record net long position on VIX futures. Given this group's poor track record, VIX upside should be limited as long as they have an extreme net long position. I expect the area just above 25, half this year's intraday high, to continue to act as resistance."

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