Markets “survived” the last Fed meeting as well as the mighty G20 meeting. Most equity indices have continued moving higher and are sitting at or around big important levels.
The SPX managed surpassing the late April highs, but the break out is losing steam. Watch how SPX closes in the coming few sessions carefully.
NASDAQ has rallied as well, but has actually been unable to visit the late April highs so far.
Betting on a break up after the recent rally looks like possibly an expensive trade. Note that both the SPX and the NASDAQ have 200-day averages totally flat sloping, i.e. there is not longer-term trend. The indices are oscillating around the longer-term average.
These types of markets can be potentially hard to trade as the break outs never occur, not down nor up.
Russell ETF, IWM US, has been a relative dog and continues to be a relative dog. The longer-term negative trend line is intact, and we have just reversed on it.
Picking possible market tops is very hard, and often an expensive “hobby”.
Our view of markets possibly getting overextended to the upside here would be expressed via long volatility strategies. Below is a chart showing VIX, V2X and VNKY. The trend is clear, but just because volatility has ben falling, we should not be feeling a “false” security.
Long option premium strategies are starting to look rather cheap. Use it for hedges, speculation or replacing longs with cheap calls are all strategies to look closer at here.
Source, charts by Bloomberg