It's been two weeks since the yield curve inversion and bond yields have reverted, and equities and oil have exploded higher, with the former on the cusp of challenging 2018 and all-time highs as we kick-off earnings season, JOLTs, FOMC Minutes and additional Fedspeak.
The rubber band is clearly stretched to Levels suggesting a pause in the SP500 near 2910.25. With Volatility compressed and Implied Volatility in the SP500 at 9.9% for the week with only a + / - 31 point move, the most probable move is to the downside and a marginal increase in Volatility. The lower and upper edges are 2861.89 and 2923.59, respectively.
Of course, as we often write, if what we logically and probabilistically expect fails to occur, the opposite move is likely more reactionary. That means a powerful move above 2911 fuels itself to a momentum burst towards 2950, as Implied Correlation, with earnings season once again upon us, focusing our attention to individual issues such as the most recent leaders according to our dispersion model.
The Magnets are updated, and as we often observe, simple as it is, a bias is formed as a tradable fulcrum point in the market.
While we clearly expect a reversion from current Levels in the equity markets in general, we must look for weakness to propagate from the lowest time resolution outward. For now, most Trends remain strongly entrenched to the upside.
Update 4-hour Levels.
Have a great week.
All the best,