Better Than Expected

After the Georgia Senate election and the siege of the U.S Capitol Building, with Covid-19 running ramped in parts of the U.K. and U.S., equities ended higher every day last week except Monday. Have the bulls lost touch with reality or do they have it right? While some well-known money managers renew "bubble" calls, the bulls seem to be singing "Don't worry be happy." First, our Market Review including another Bitcoin comment.

Before beginning, we must confess to some "Mission Creep" guilt for expanding coverage beyond the S&P 500 Index. If continued the Digest could become just like other long-established financial media publishers. Instead, we will return to basics where we are more likely to add value using our best in the business rankers, scanners, and volatility charts to prepare both tactical and strategic trading plans, along with a few economic indicators that don't seem to get much coverage.

S&P 500 Index (SPX) 3824.68 advanced 68.61 points or +1.83% last week after last Monday's key reversal failed to make a lower low on Tuesday ending what could have become a pullback. From there multiple new closing and new intra-day highs boosted sentiment, as in "For we can fly, we can fly up, up and away." In the event of an unexpected pullback, the zone between 3750 and 3700 should provide the first support followed by the 50-day Moving Average way down below at 3618.64.

CBOE Volatility Index® (VIX) 21.56 dropped 1.19 points or -5.23% last week. 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 .44 points or -.53% closing the week at 16.93%. Based upon the chart below, from August of last year the mean, as in regression to the mean, appears near 20%. If so, this suggests increasing volatility risk associated with pullbacks.

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Disclaimer: IVolatility.com 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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