Option Traders Are A Bit Too Calm Again

S&P 500 rose once again, and the slight retreat before the close isn‘t an issue in light of constructive credit markets. Tech, communications, industrials, value, real estate, and financials rose while healthcare and notably utilities didn‘t play along. VIX has calmed down yet again, but the put/call ratio scored bullish complacency readings not seen for months. The boat is increasingly getting tilted towards the bullish side – but open long profits can keep growing.

Credit markets though aren‘t flashing warnings signs – be that corporate bonds, Treasuries of various maturities, or different Treasury spreads such as the 10 to 2 year one. It‘s just the dollar that is tanking here on the Fed telegraphing taper vs. the market continued to bet that it‘s still bluffing, for now:

(…) Stocks, bonds, and currencies aren‘t reacting much – it‘s only commodities that are in consolidation mode, but this can be chalked down to inflation expectations calming down over the prior three trading days. Until the Fed truly moves or makes its forward guidance as unequivocal as can be in this respect, the markets would be in a doubting attitude (or at a minimum, a wait-and-see one).

The S&P 500 is firing on both cylinders at the moment, with technology jumping higher off very oversold levels, and $NYFANG not lagging too noticeably behind. Nasdaq is well bid at the moment, and it remains to be seen how value takes to retreating yields in the still ruling reopening trades atmosphere.

Gold and miners aren‘t flashing warning signs, and the silver outperformance isn‘t a call to the exit door. The charts and macroeconomics speak in favor of continued bullish consolidation before a spurt higher in all three assets. And as the Fed isn‘t perceived in the least as about to get tough(er) (whatever that means, cynics would say), the path of least resistance remains up as the copper to 10-year yield ratio confirms. No, not too much cream has come off in commodities. Open gold profits can keep growing at their own pace but I wouldn‘t be surprised by a brief setback first either.

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