Wall Street Gets Walloped as Volatility Spikes

By Karee Venema / February 09, 2018 / www.schaeffersresearch.com / Article Link

It was another volatile week of trading on Wall Street, withthe Dow trading in a more than 2,160-point range as of this writing, and sinking into correction territory. The bulk ofthe price action occurred to the downside -- a possible self-fulfilling prophecy, and marking the fastest S&P pullback from record highs in decades -- with the major benchmarksslumping to their biggest weekly losses in years.

VIX Options Volume Hits Records

The CBOEVolatility Index (VIX), meanwhile, had its biggest one-day gain ever, andsurged to its highest point since August 2015. The spike in volatility subsequently put an endto one popular inverse volatility note, and sparked record-setting VIX options volume.

Panic Selling Creates Buying Opportunities

The selling spread across multiple sectors, with financial shares seeing notable losses. Wells Fargo (WFC), for instance, is pacing for anearly 12% weekly loss, after the Fed levied harsh sanctions against the bigbank for its fake account scandal. Bank of America (BAC) is also staring at abig weekly deficit, but could bounce back, if this buy signal plays out onceagain.

Options bulls rallied around automakers Ford Motor (F) and General Motors (GM), even with both automakers headed for weekly losses. And while fellow car stock Hertz (HTZ) also sold off, it could be set to bounce from a historically bullish trendline. HTZ wasn't the only stock flashing buy signals this week, with these two athleisure names and this FAANG stock possibly presenting appealing trade opportunities.

Tech stocks got walloped, too, and one QQQ options bear bet on even bigger short-term losses. Broadcom (AVGO), meanwhile, erased its early week M&A gains, but the Apple supplier remains one of the best stocks to buy after a sharp S&P sell-off -- unlike these two Dow stocks.

Micron (MU) also swung to a weekly loss, despite a positive reaction to this week's guidance update, while Apple (AAPL) breached a key trendline. Elsewhere, Amazon failed to capitalize on reports of a new Whole Foods grocery service, while speculation surrounding "Shipping with Amazon" leveled these two delivery stocks and General Electric (GE) was targeted for new lows. Plus, Expedia (EXPE) is pacing toward its worst day in more than four years.

Snap, Twitter Stocks Show Resilience

Not all of the action was to the downside, though. Snap (SNAP) and Twitter (TWTR) both gapped higher after impressive earnings reports, with the former reclaiming its elusive IPO price and the latter exploring multi-year highs.

Tech names Akamai Technologies (AKAM), Fabrinet (FN), and Oclaro (OCLR) also soared after earnings, while Array Biopharma (ARRY) hit a record high on upbeat melanoma drug data, and Wynn Resorts (WYNN) took a brief break from its downfall after the casino's CEO Steve Wynn stepped down amid sexual misconduct allegations.

Dow Earnings, Inflation Data on Tap

If history is any guide, the stock market could be ready to bounce in the near term, with both the Dow historically outperforming after 1,000-point drops. Looking ahead to next week, there's plenty on the docket to spark more volatile moves. On the earnings front, blue chips Coca-Cola and Cisco Systems will report, while inflation updates will highlight the economic calendar.

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