What Are Chances Of A Melt-Up From Here?
USD & US 10Y yield are even perkier than I expected. Crude oil is bouncing on cue. But VIX toying with backwardation is absolutely getting in the way of a market melt-up.
» CLUB/EDGE client post OCTOBER 9TH, 3:00 PM ET.
Volatility Backwardation Threatens
Now that SPX has pushed above not only THE key $5750 call wall but also prior all-time-high of 5767.37 from Sept 26th, my higher price targets are clearly in view: 5820 to 6010 - as long as we STAY above 5767.37 on daily close.
But are we just going there without acknowledging these looming economic risks ahead:
ELECTION - Nov 5th and all that entails
HURRICANES - Helene last week; Milton this week and the hit to GDP not to mention unemployment.
MIDDLE EAST WAR - which is not going away anytime soon & could spike oil not to mention nuclear escalation.
Pretty much looks like markets don't know how to price the above in AND/OR positioning in markets is overestimating volatility.
Intermarket Divergences A-plenty!
Overestimating volatility may explain some of my divergences I have shown clients of late, like this chart of VIX3M/VIX: