Below is a brief transcription from The Macro Show, our daily pre-market video broadcast hosted by CEO Keith McCullough:
Front month US Equity volatility came within an inch of closing at an all-time low yesterday. The VIX literally closed at 9.15 just above the November 2017 all-time low of 9.14.
Our bearish view on volatility (and bullish view on US Growth) has been a big part of riding this bull market higher. Something that’s bearish trend, in volatility terms, is bullish for that thing in price terms.
To break it down conceptually, if an asset’s price and volume is rising while its volatility is falling that’s bullish. It means investors are buying with conviction. Conversely, if an asset’s price is falling while volume and volatility are rising that’s bearish. It means investors are selling with conviction.
Always study. Measure and map the rate of change and the relationship between price and volatility. That is one of the core foundations of the Hedgeye model that’s differentiated. And again, it’s also why I think we continue to beat the pack when it comes to calling big macro market moves.
But don’t want to get complacent with the implied volatility premium (the market’s volatility expectations versus historical or realized volatility) for the S&P 500 is back down to only +2% (vs. 30-day realized). This is a good day to make some sales, book some gains and smile.