Weeden strategist Michael Purves notices an interesting correlation between SPX and the VIX fear index. After a series of record highs for SPX, the collapse from the beginning of the year has already wiped out and the future of the stock markets looks bright.
Such formation of a strong spike in VIX and a sharp drop in stock prices has been observed three times since 2010. In these cases, SPX has always continued its bullish trend.
Now the question for traders is whether this dependence will be maintained this time. Against the backdrop of a trade war that could not break the stock markets and the series of geopolitical risks from the beginning of the year, the future for risky assets seems to be positive.
From Money Management's point of view, however, it is more reasonable to wait for a slight adjustment before we begin the new long positions build up.
Source: Bloomberg Finance L.P.
Chart: Used with permission of Bloomberg Finance L.P.
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