By the end of last week with the major equity indexes at or new highs along with most indicators at or near bullish extremes, it seems like there is something more than good news and earnings reporting involved. Due to Covid-19, some fear economic growth may slow again, but equities keep marching higher pushing market sentiment indicators to extremes while amplifying "Bubble" assertions. The Market Review touches on just a few concerns while including an overdue look at WTI Crude Oil.

S&P 500 Index (SPX) 3841.47 gained 73.22 points or +1.94% last week making new closing and intraday highs on both Wednesday and Thursday. The operative upward sloping trendline from the October 30 low at 3,233.94 now crosses just above 3800 with the 50-day Moving Average down below at 3694.15.
CBOE Volatility Index® (VIX) 21.91 slid 2.43 points or -9.98% 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 2.16 points or -11.46% ending the week at 16.68%.

Readings under 20% encourage the bulls.

VIX Futures Premium

Another bullish indicator from the VIX Futures Market: Friday's premium at 16.58% places it will into the bullish green zone between 10% and 20%, vs. 2.69% on January 15.

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.

Setting the Stage

Although the S&P 500 Index set new closing and new intraday highs on both Wednesday and Thursday, every day last week ended in the Risk Off rotation column meaning cyclical growth stocks that depend on an expanding economy lagged the secular growth favorites. While it could be attributed to earnings reporting, another variable needs watching.