Better

But not good

Equity markets rebounded yesterday and our measures of volatility also improved. However, we ain’t out of the woods from what I watch. The VIX Mix picked up seven points but that was only enough to inch out of the “bear” slice into the “bearish” slice. 15 of 17 underlying components are in the red and none are bullish.

We sit on a streak of 35 trading days since our last bullish reading for the Mix. The uptrend of the S&P 500 appears to be tired and an 80%+ reading for the VIX Mix looks to be miles away. Unfortunately, this is no time to relax.

The chart below should be familiar to regular readers. The ratio of VIXM to VIXY provides one perspective on the shape of the VIX futures term structure. Bullish for risk-on assets when the ratio is moving from lower left to upper right. As you can see, the ratio line stopped rising early in the year and has turned bearish. This is risk-off.

Another look that’s not constructive for risk-on positioning is one of our credit market comparisons. This is the ratio of investment grade corporate bonds versus intermediate term Treasury bonds. Same idea. LLUR supports risk-on and ULLR is risk-off and that’s the current look.

So yesterday’s bounce was welcomed by the vast majority of investors. But volatility remains elevated and this is no time for investors to relax. I’m in Austin for an EQD conference focused on managing volatility. I’ll have a recap for you in the weekend edition. Regular update tomorrow morning.

All content presented here is for informational and educational purposes only. Distribution of any content to any persons other than the recipient is unauthorized. Furthermore, any alteration of content presented here is prohibited. By accepting delivery of this presentation, the reader agrees to the foregoing. Certain information presented herein has been obtained from third-party sources considered to be reliable, but there is no guarantee of completeness or accuracy and it should not be relied upon as such. There is no obligation to update or correct any information presented. Readers should not treat any statement, opinion or viewpoint expressed herein as a solicitation or recommendation to buy or sell any security or follow any investment strategy. This material does not consider the investment objectives, financial situation, or needs of any particular reader. Readers should seek advice from a qualified financial or investment advisor prior to making any investment decision.