Record highs have felt good, but maybe too good?

Reuters

Record highs have felt good, but maybe too good?

2024 10월 17, 오후 4:35 GMT

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Main U.S. indexes modestly green; Nasdaq out front, up ~0.6%

Tech leads S&P sector gainers; Real Estate weakest group

Dollar, gold gain; crude edges red; bitcoin dips

U.S. 10-Year Treasury yield jumps to ~4.09%

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RECORD HIGHS HAVE FELT GOOD, BUT MAYBE TOO GOOD?

The S&P 500 index .SPX is up nearly 23% year-to-date, and on Thursday, it's on track to score its 47th record closing high this year. This has it on pace for its most record closing highs for a year since 70 in 2021.

With this, the market's implied volatility measure, the CBOE Volatility Index .VIX, which is known as the market's "fear" gauge, although it may more accurately be described as a measure of uncertainty, has recently retreated back below the often cited 20.00 level, suggesting the perception of a lower risk environment.

On Thursday, it is now around 19.00.

On another note, this past Monday, the 5-day moving average of the CBOE equity put/call ratio fell to 0.512, its lowest level since July 19, 2023:

The put/call ratio measures demand for downside protection with put options versus the upside optionality with call options. The 5-day moving average helps to smooth out a bit the ratio's very short-term volatility.

From a contrarian perspective, this measure's high readings can suggest intense pessimism among investors which can occur around market lows, while low readings may signal complacency which can be pervasive around market highs.

Since the SPX has advanced to record levels in 2024, a number of market highs, leading to pullbacks of varying severity, were preceded by this put/call measure bottoming in the mid-to-low 0.5 area.

From the current level of 0.53, the measure could always resume its decline. (It bottomed at 0.476 in July 2023). However, in that case, in terms of recent history, it would then be signaling even greater complacency.

Meanwhile, this put/call measure's recent relatively low levels have traders on edge, especially with the S&P 500 index nearing key hurdles around the 6K mark.

(Terence Gabriel)

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FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:

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