Top 10 ETFs

Friday's S&P 500 Index advance along with other important indices changed the picture as it appears the operative Rising Wedge could fail, reducing the probability of a meaningful retest of the December 26 bottom. Should it continue higher this important week for earnings reports and more Jay Powell commentary, the bear market label may no longer be applicable. Details follow including updated charts for the S&P 500 Index and Market Breadth as well as our ranker results for the Top 10 ETFs.

S&P 500 Index (SPX ) 2664.76 declined 5.95 points or -.22% last week, after a gap up opening Friday, then closing 22.43 higher. Now well above the 50-day Moving Average at 2613.88 it appears to be headed for the operative downward sloping trendline from the October 3 high at 2939.80 shown in the chart below.

CBOE Volatility Index® (VIX) 17.42 declined .38 points or -2.13% 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, gained .38 points or +2.56% ending at 14.41 and still near the bottom of the recent range shown in the updated one-year volatility chart with an SPX line chart below.

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VIX Futures Premium

The chart below shows as our calculation of Larry McMillan’s day-weighted average between the first and second-month futures contracts.

With 12 trading days until February expiration, the day-weighted premium between February and March allocated 60% to February and 40% to March for a 5.17% premium vs. 2.82% the prior week ending January 18. Below the bottom of the green zone between 10% to 20%, it suggests cautionary positioning unconvinced the SPX advance will continue.

The premium measures the amount that futures currently trade above or below the cash VIX, (contango or backwardation) until front month future converges with the VIX at expiration. Previously, declines below 10 and advances above 30 were unstable. If there was only one indicator available, this one would be a top contender.

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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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