Discussion
I’m surprised by today’s SPX strength given yesterday’s move in VVIX (typically foreshadows NT weakness), and the lack of endorsement by VVIX and HY CDX of today’s SPX action. VOL market flows (structured products, specifically) seem to be in charge given SPX’s refusal to yield to these other signals.
HY CDX spiked up at EOD to close at the HOD, which is very odd given SPX strength. I think Waller is a big deal tonight, as this dramatic easing of FCI since CPI is not something the Fed is going to want to see while it tries to maintain right policy just enough to engineer a soft landing. So, HY CDX could be foreshadowing that.
But the overall velocity of this SPX move against the backdrop of extremely elevated sentiment and these negative divergences leads me to believe we may not get much of a pullback before the final push to 4600/4700 (heck, we’re 90 points away from 4600 as of the close today). VOL market flow is clearly in charge.
Exhibits