More Bull (No💩)

But investors remain wary

Monday in a nut shell: no bad news out of the Middle East + NVDA up 4% and GOOG up almost 2%. Enough to allow the VIX Mix to rally back into bullish territory.

11 of 17 underlying components also in the green with only one still looking like a bear (long time readers know which one it is). Also enough of a push to get the 10-day moving average to change direction as shown below.

On the other hand, bullish sentiment still reflects concerns about what could happen in the Strait of Hormuz. This next chart shows that while the S&P 500 is sitting at fresh all-time highs, the VIX has not returned to the lower level reached in late December, before all the fun started.

Likewise, VOLI (at-the-money implied volatility) and TDEX (cost of a three standard deviations OTM put on SPY) have made sharp recoveries from the late March low for SPX but remain elevated relative to their December lows.

The bottom line from where I sit is that investors will not go full bull until there is some definitive resolution to the mess in the Middle East. And if you think both sides of the conflict have used the ceasefire to restock their arsenals, I suspect that a lot of investors have crafted action plans for a possible reescalation. That might actually dull the potential impact of new fighting on the volatility complex. Tick, tock…..

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