AT40 = 44.1% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 48.5% of stocks are trading above their respective 200DMAs
VIX = 12.2 (was as high as 14.1)
Short-term Trading Call: neutral

Commentary
Another North Korean nuclear power move caused more rattling in financial markets. The last time the market cared about the growing drama on the Korean peninsula was August 29th. At that time, the S&P 500 (SPY) gapped down at the open, and the volatility index (the VIX) gapped up. By the close, all was well again as buyers quickly stepped in. The S&P 500 closed flat on the day, and the VIX ended the day with a tiny gain. I called my post for that day “More Stock Market Volatility and Fizzle.”

THIS time around markets reacted differently: the residue of fear actually lingered into the close. Financial markets had plenty of time to adjust, but they did not quite do so. The news of North Korea’s test of a hydrogen bomb came on Saturday, September 2nd; U.S. markets did not trade on Monday because of the Labor Day holiday. European and Asian markets were mixed by the time U.S. traders returned for what marks the official end of summer trading. The volatility index gapped up significantly, but the S&P 500 opened just slightly down. The gap buyers showed up a little late – after about the first 15 minutes of trading – but it seemed like the typical “volatility and fizzle” was underway. Instead, around 10:25am Eastern, the sellers moved in again and managed to create some cascading selling until just after lunch (I guess the sellers decided to take their lunch and run?). While buyers controlled the action the rest of the way and pushed the S&P 500 back over its 50DMA support, the index still lost 0.8% on the day. The VIX suffered a huge fade of its high but still ended up with a 20.7% gain – that gain was exaggerated by the intense pressure the VIX suffered last week after fading from the last volatility and fizzle driven by North Korea.

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