Volatility continues to be elevated both in terms of realized and implied. The CBOE Volatility Index (^VIX) and the equity-only put-call ratios began to rise well in advance of the current market decline, and they are still advancing, explains Lawrence McMillan, editor of Option Strategist.
The S&P 500 Index (^SPX) also dropped sharply early last week as various support levels gave way on the chart. Of primary concern was the violation of the 6,475-6,550 support area. Eventually, SPX bottomed on Tuesday, with a low near 6,330, which was also a minor low last August. There should also be support near 6,200 – the lows of last July.
Breadth improved quickly over a three-day period last week. The fact that breadth was positive on Thursday April 2 after the market opened 100 points lower is impressive. Both breadth oscillators are now on confirmed buy signals as of April 2.
VIX has continued to spike up and down. It rose above 31 again last week, but closed near 24. VIX remains in an uptrend, so the trend of a VIX sell signal is still in place. There have been repeated “spike peak” buy signals, but we are waiting for confirmation from the “construct” of volatility derivatives. So far, that “construct” remains bearish.
