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Too Much Exuberance?

Jun 8, 2020

Last week was a significant week in the market with the weekly option implied move in the S&P 500 eclipsed by a factor of 2 or 2.4% above the expected upper bound. Moreover, sector rotation took hold with laggards leading and small stocks outperforming major indices.

As I type this, the S&P 500 is breaking out in Globex and already achieving a quarter of its weekly expected move.

Implied Correlation is at extreme lows, and the Weekly Trend is up, while the market is showing signs of excessive exuberance with 47% of the S&P 1500 trading outside its upper Bollinger Band, and 94% above the mid-band.


Prudence suggests looking for signs of exhaustion and possible reversion, as upper bounds in Levels are approached, and Volatility contracts.


The Economic Calendar is active with the FOMC Meeting and subsequent Fed Chair Powell's Press Conference.


Updated Index, Commodity, and Treasury Levels.


Have a great week.


All the best,



Scott


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