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Time to Break Outside of the Volatility Box

Mar 3, 2019

The SP500 ended the week flat as it tried to decipher mixed economic data, but is currently rallying in Globex on renewed hope of a U.S.-China Deal to end most tariffs.

Whether this is "the real deal" this time or not, it is likely the grind continues higher as our work points to a breakout of the Volatility Box defined last December since we have cleared 2812.50. Clearly, all Trends remain up.

For the week, the Option Implied Move is + / - 33 points with lower and upper edges at 2770.25 and 2837, respectively. As we have observed time again, markets trade efficiently from a risk perspective within these boundaries and inefficiently outside of them.

With Volatility once again at low levels and Implied Correlation pointing towards continued focus on individual underlyings, only exogenous catalysts will cease this grind higher.

We have potential catalysts this week from the Unemployment Situation Report, ECB Rate Decision, Fedspeak, and of course actual resolution of the U.S.-China trade war.

Just as our Levels pointed to high probability reversion in the price of the Bond complex, we anticipate that occurrence in Equity Indices, but not before trading to the upper limits as pre-computed in our work. This remains an Investors' Market in Equities and a Traders' Market in other products.

Updated Daily Levels.

Have a great week.

All the best,


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