“Correlation does not imply Causation” -Karl Pearson-
$SPX, $VIX and Options
On Wednesday, $SPX closed cheap relative to other risk on asset classes. The high beta currencies closed higher while the low betas closed lower. Some dollar weakness also came into the market and this allowed the German spread and EURUSD to go bid. Yet $SPX closed lower, alerting us to a possible spread trade to buy the S&P500 in today’s session.
Going into Thursday’s close, Volatility ($VIX) and the Puts-Call Ratio are pointing down and $SPX has gained +0.70% in the late hours of trading today. The $VIX is down -7.43% on the week and the US dollar has pulled back but is still up +0.57% on the day. The market structure of VIX suggests a bearish couple of weeks in March and thus we can expect the possibility of the market going bid during that period.
Other values to consider
DE10Y-US10Y +7.28% (Weekly)
High Beta Currencies/Low Beta Currencies +0.25% (Weekly)
Key Close
On $SPX, if price closes above 3696.6 tomorrow we may witness a 2.4% rally up to the high of last week at 4080.2, if volatility and the PC Ratio keep dropping and risk on assets stay bid. The US ISM Services PMI is coming out tomorrow, the current number is 55.2 and analysts expect a drop to 54.5.
