Is The VIX Sending a Hint?


The S&P  crept closer to its record high Tuesday, lifted by oil’s return to $50 a barrel and renewed confidence that U.S. interest rates will stay low.  The gains briefly boosted the Dow  above 18000 for the first time in more than a month and the S&P 500 closed within 0.9% of its record, spurred by energy shares that has climbed with the price of oil.

The chart above is interesting. It shows the return for the market when the market rises near new highs and the VIX rises simultaneously. The returns for the market were anywhere from 2.1% to 6.5% lower. So VIX rising with a rising market, not so good.  We shall see if this is just a useless data point over the short term or not.

Oil extended gains as the dollar weakened and production outages curbed supply. U.S. crude rose 1.3% to $50.36 a barrel, settling above $50 for the first time since July. Prices have nearly doubled since hitting 13-year lows earlier in 2016 as companies have cut spending on new drilling and unplanned outages in Nigeria and Canada helped shrink the global oil glut.  These Nigerian rebels are really causing some havoc.

Many are saying oil is really overbought here. Honestly I don’t see that and I do think 55 a barrel could be possible short term.  We’ll see.

Energy stocks (XLE) though are a different story and some are starting to look a bit long in the tooth in some cases. Readings are getting overbought, but not dramatically. If crude goes higher, energy stocks should too though.

Gold and gold miners have rested the last couple of days after Fridays big short squeeze. As I said the other day, these sectors can go a bit higher before the worm turns against  them again.

The market does look really good here and the bulls are in control.  Its a good time to be tightening your stops.

The balance of YRD stopped today +11% and I also added PLNT & BUFF as longs.

See you in the morning.


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