Steady Melt-Up


“Good” morning, everyone. Time to do a catch-up on this house of mirrors.

The small caps, driven largely by strength in regional banks yesterday, has augmented its melt-up yesterday. It drifted steadily for many hours and is now gently pushing to another multi-month high.

The S&P 500 futures, the /ES, is also higher (everything is green). The task that stands before it is to conquer the peak from mid-August. Given the market’s strength over the past eight months for no apparent reason, I see no obstacle to the /ES just blithely slipping past this. Indeed, I saw one prominent Sloper offer his target for 6,000 on the S&P before it’s all over. How swiftly things change around here.

If you look at the /ES and draw a simple straight line from October 13th to the present, you can see how the volatility has been shaken out of the system. Take a good look at how the price bars (and these are weeklies) interact with that line. At first they wildly gyrate far away from it because whooshing back through it. As the months past, the dynamism dissipates, until the price bars more obediently cling to the gravitational pull of that line. There hasn’t been a meaning sell-off since February.

Which, of course, has strangled the life out of the VIX, which yesterday cracked to a 13-handle for the first time in eons. Volatility is a pitiful one-third of its level last year.

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