July has staged quite a nice rally of over 8% in just 8 trading days. If you find religion in the 8’s, then you might think it is the start of the market’s new order.
The volumes have not been tremendous and the sentiment still seems to be negative, but the move upward has been linear. What was interesting to me about today’s trading was that despite a 1.54% rally on the S&P 500, the VIX actually ended the day in positive territory.
After bouncing around the 23.4 level, the VIX seemed to develop quite positive correlation to equities and actually ended the day at its highs. We could speculate that there are probably a lot of artifacts in current VIX levels due to the looming July expirations, but I think the 200 Day moving average provides an interesting vantage point:
If implied volatility is driving this ship, then it would appear that we are repeating the pattern that emerged June 21st when the VIX last hit its 200 day moving average and subsequently bounced aggressively. It also preceded the last large 8% decline. Perhaps 8 is not such a lucky number.