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.
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Thank you for your posts despite being in a conference!