OK. Raise your hand if you were listening to the radio in 1967 when The Fifth Dimension released Up, Up and Away. The song was written by Jimmy Webb and recorded in Los Angeles with backing from several members of The Wrecking Crew. The song was emblematic of the feel-good Easy Listening charts in the late ‘60s offering soothing sounds against the backdrop of the Vietnam War and domestic unrest around the Civil Rights movement. The “Feel Good Summer” and “Good Times, Great Oldies” on Spotify give you some of the vibe.
Equity markets continue to roll higher as if tethered to a “beautiful balloon.” Bears are being punished and hedges are a drag on returns. The VIX Mix is back in bullish territory, supporting short volatility positioning.
Yesterday registered a fifth consecutive green close for our composite volatility indicator. It’s forming the third grouping of bullishness since early May.
Another measure that supports the bull case is the return of a smoother path for daily returns on the S&P 500 as measured by average true range as a percent of price (ATR%). Levels below 1.5% tend to line up with market uptrends and that’s where we are right now. So for the moment, the pain trade is any bearish bet in the current environment.
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