Analysis
VOL: Confirmative of the move up in equities today, but not overly decisive, continuing the trend of stickier VOL as illustrated well by the trend in VVIX/VIX and UX3/VIX (second image below).
CDX: Like VOL, confirmative on the day, but not decisively so. Could be a very early sign that CDXs could stick higher into a blow-off equity top into January/February.
Breadth: Not overly bullish today considering the move up in equities, but not bearish, and composition of breadth was decisively risk-on.
FICC: Pure Goldilocks with USD, rates, and oil down. We’ll see with tomorrow’s NFP print if FICC has been anticipating a dramatic downside miss in jobs.
Market Character: Breaking with the recent trend of not being able to hold a move above the JPM 4515 12/31 pin, SPX stuck the move higher today. Bullish, even if it meanders back to 4515 by 12/31.
Flows Windows: Currently in the window of strength ahead of 12/15 OPEX. Anticipating some volatility around the 12/13 SEP and Powell press conference, but unlikely enough downside momentum into 12/31 to take SPX much below 4500.
SPX Tactical Analysis: NFP tomorrow, CPI, SEP and Powell next week are all catalysts for SPOOZ to move in either direction. As discussed today, upside pressure in equities continues to build. If NFP, CPI, SEP and Powell can’t take the market down and the JPM 4515 pin keeps SPOOZ like a beach ball underwater, SPX will explode higher in January.
I’m a buyer of SPX 4500 ahead of 12/31 and a buyer of SPX 4600 on 12/31 if it gets that high.