The US Fear Index (VIX) continues to bounce along multi-year lows even as the S&P500 continues to post new all-time highs suggesting to MM that the risk / reward is finally on the side of a rally by the VIX index.
Over recent weeks MM has highlighted the increasing number of divergences across some classic sentiment indicators. This picture has not changed, we have intact divergences in the Investor Intelligence Bullish Consensus, the NAAIM Exposure index and in the more short-term oriented CBOE put/call ratio, which has bounced from a 20-year low although it’s still at historically very low levels. The later implies the US market is under-hedged and therefore vulnerable for negative surprises but it doesn’t mean a fall will happen, just that plenty of pain will be felt by investors if it does.
