The S&P 500 index finished higher, and just about every measure within the volatility complex finished lower, making it a bit of an odd day, at least from a mechanical standpoint. The VIX closed below 17 today, which I find a bit surprising, especially given that oil implied volatility is still around 75.
The interesting thing, I suppose — and I’m kind of just thinking out loud — is that the oil volatility index (OVX) is currently trading at more than four times the VIX, and the only other time that happened was during COVID.
It is the same with OVX versus the MOVE index, so either the bond and equity markets know something about the situation with Iran and the oil market that professional oil traders and hedgers do not, or equity and bond market volatility is wrong.
So, who knows — I don’t know either; it just seems a bit odd to me.
The dispersion index fell today to 37 and should continue to decline from here, now that Apple (AAPL) has also reported results. Surprisingly, implied correlations were down too, which is unusual. It’s not often that the spread between dispersion and correlations falls and the S&P 500 rises — that’s for certain. I mean, it happens, but not often. At least as of today, we are in a period where this spread should be in contraction.
Finally, USD/JPY rose as high as 160.75 today, prompting intervention, and then moved back to 156.50. We will see how the market responds over the coming days, but historically, when JPY strengthens across FX, it tends to be negative for risk assets such as the MXN/JPY
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