Stocks rallied again today, bringing volatility back to levels last seen on November 4, with the VIX 1-day closing below 12. At this point, I think the volatility-driven support for the index has largely run its course. As I mentioned yesterday, there was still some room for additional upside as volatility continued to decline. However, that process now appears largely complete, suggesting little additional support left to come from further volatility compression.
Meanwhile, the Nasdaq rose more than 2% today, although it finished off its highs after gaining nearly 3% earlier in the session. On a positive note, the index gapped above its 200-day moving average. It has also moved out of oversold territory, pulling away from its lower Bollinger Band, while the RSI has climbed firmly above 30.
The next major test will come at the 20-day moving average, which could prove to be an important resistance level. If the Nasdaq can break above it, the upper Bollinger Band would seem like a reasonable next target. However, clearing the 20-day moving average will be critical in determining whether this rebound has room to extend further.
The bond market was closed today, but the dollar staged a strong rally, with the Dollar Index closing at its highest level since April 2025. The move appears to mark a clear breakout from a bullish flag pattern, suggesting the Dollar Index could have significantly more room to climb from here.
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