Don't Worry, Be Happy

According to our indicators, last week equities segued from an early correction to near perfection in five days. Helped by rotation into energy and small-capitalized stocks the major indexes reached new highs, dispelling worries created by short squeeze activity the week before. The Market Review explains with details along with an updated chart of the U.S. Dollar Index (DXY).

S&P 500 Index (SPX) 3886.83 gained 172.59 points or +4.65% last week making a new closing and intraday highs on both Thursday and Friday after bouncing off the respected 50-day Moving Average last Monday in a real display of support. With the new highs, a new upward sloping trendline emerged with about the same slope as the 50-day Moving Average now 3741.75.

iShares Russell 2000 ETF (IWM)  221.65 gained 16.09 points or +7.83% last week reflecting rotation into mid and small capitalized stocks helped by many in the energy sector as WTI crude oil broke out above 54 and closed at 56.85 basis March futures, up 4.65 points or +8.91%. Gaining considerable more in percentage than SPX last week, IWM regains the "decider" title once again also makes new closing and intraday highs.


CBOE Volatility Index® (VIX) 20.87 dropped 12.22 points or -36.93% 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, slid 9.73 points or -37.39% ending the week at 16.29%.

The chart below shows last week's spike up to 26.02% quickly fizzled as it dropped back to the lowest level since December 4 at 16.17%. From there the next lower levels were in early 2020 at 14.02% on February 21, 2020, and as low as 9.58% on January 17, 2020. Last week options implied volatility began returning to pre-Covid-19 levels. Suggesting the uptrend continues.

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VIX Futures Premium

This indicator made an equally sharp reversal last week as shown in the Daily Volume Weighted premium chart spiking up to 21.69% and moving back into the green bull zone – back to levels reached in August and September 2020.

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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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