The Correction Will Not Be Televised

You'll need to see it for yourself

About that government shutdown that some folks were kvetching about. Meh.

Way back in 1971, with Vietnam raging and Richard Nixon in the White House, a poet/jazz singer/musician named Gil Scott-Heron recorded The Revolution Will Not Be Televised to point out all of the unpleasant realities that were not being covered by the media. It popped into my crazy brain that the many worries percolating under the surface of the equity markets “will not be televised” either. We all know that some form of pullback or correction will be forthcoming, but it seems that will look like the red box and will be followed by the green box. FOMO is a factor. Passive inflows are a factor. Investment professionals face a serious case of FOGF (fear of getting fired) should they be too defensive. The correction will not be televised.

That nice rally in the green box resulted in SPX closing above 6700 for the first time ever. New ATH closes for the Naz 100 and DJI as well. What the hell is wrong with our volatility composite? The VIX Mix eked out a measly one point improvement and remains stuck in neutral. Only five components are bullish and three are in the red.

I don’t know about you, but I’m tired of adding the green and red arrows to this next chart. It would be really nice to see a fresh green bar that would help confirm the strength of the SPX uptrend.

Today’s extra chart looks at the volatility of the S&P 500 measured using average true range (ATR) as a % of SPX price. For newer members of the audience, ATR is a measure of volatility that incorporates day-to-day price gaps rather than simple close-to-close standard deviation. We prefer to look at it relative to price as an adjustment for the reality that the SPX denominator gets bigger over time. Readings below 1% (green line) tend to reflect a steady uptrend for SPX. A reading below 0.75% is one of those “quiet, too quiet” conditions that frequently lines up with a local high for SPX. We need to be paying attention if/when this reverses higher and moves up through the green line. But trust me. The correction will not be televised.

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