Better Breadth

Our focus on market breadth continues again this week as it has for the last few weeks since the divergence will be resolved either by more issues participating in the advance or by the entire market turning lower. Last week more issues joined the advance so breadth improved slightly delighting the bulls. The Market Review includes the details.

S&P 500 Index (SPX) 4535.43 nudged up 26.06 points or +.58% while making new closing and new intraday highs on Monday and then again on Thursday with risk-off sectors bettering the more cyclical risk-on sectors 4 to 1. The operational upward sloping trendline that tracks the 50-day Moving Average at 4407.75 should provide solid support on any pullback attempt.

Invesco QQQ Trust (QQQ) 381.57 added 5.53 points or +1.47% again breaking out into new high territory making a new intraday high on Wednesday at 382.71, before pulling back slightly on Thursday and Friday. Once again, the big cap stocks tech stocks outperformed the SPX. The 50-day Moving Average at 365.72 and the slightly higher upward sloping trendline make solid support.

CBOE Volatility Index (VIX) added .02 points or +.12% last week to finish 16.41. Our similar IVolatility Implied Volatility Index Mean, IVXM using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option, slipped .01 points or -09% last week closing at 10.71%, compared to 10.72% for the week ending August 27 and again approaches the June 25 low at 10.32%. – Still bullish.

Our estimate of the mean for the current relevant range begins on June 5, 2020, at 19.70% and slopes downward, ending Friday at 15.57%.



VIX Futures Premium

VIX futures premium on Friday ended at 17.13%, in the green bull zone with the front month September futures losing time premium fast with 9 days to expiration.


Since most of the volume and open interest are in the two closest futures contracts measuring the volume-weighted premium relative to the standard 30-day VIX provides a good real-time sentiment indicator based upon actual commitments of large Asset Managers and Leveraged Funds. The chart reflects the distance from the VIX to the futures curve computed from the two front-month contracts.

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Disclaimer: is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter ...

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