Volatility Divergence
S&P 500 rose +1.1% last week to a new all-time high as investors digested the Federal government shutdown and delayed payrolls.
Impact Snapshot
Fed FOMC Minutes - Wednesday
Fed Chair Powell Speech - Thursday
Consumer Sentiment - Friday
Inflation Expectations - Friday
Macro Viewpoint
Even with some late-session softness on Friday, the S&P 500 managed to close slightly higher, extending its longest winning streak since July.
October has historically seen a big pickup in volatility. For example, over the past 96 years, SPX realized volatility has increased by 26% from August to October on average.
As we enter Q4, it’s worth noting the continued divergence between equity implied volatility and realized volatility, which is one of the most pronounced differences we’ve seen on record.
Heightened hedging demand indicates investors are paying elevated premiums for portfolio protection despite low actual market volatility, suggesting concerns about potential risks not yet materialized in price action.
In today’s Prime Intelligence we share what the future holds after the initial observations of such events. You can access it by becoming a Subscriber.
Deja vu
You’ll be surprised by the difference it will make in your day-to-day trading if you have a solid market plan and references to look at instead of going in blind.
Everything you see in the video below — all pivots such as settle, aVWAP, and FZ target, along with the context and scenarios — were provided to our subscribers during the overnight session and at the time the video starts.
This video is another example of how the market reacted after the fact relative to our pre-market plan and references. (Pause to read the comments if needed.)
By understanding the relationship between price and value, auction market theory, and structure, you can get a holistic view of what the market is really doing. This can help us monitor for continuation or the lack thereof, identify solid profit targets, and manage our risk significantly better.
These nuanced observations can be used with any strategy and are the exact same data points we shared in our “Field of Vision” article just a few days ago, and we saw the market doing the exact same thing all over again.
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