This week’s episode examines the divergence between positive equity index momentum and building stress within underlying volatility and credit markets. I analyze recent behavior in the two market models, tracking how healthy mechanics coexist with historic extremes in implied correlation, sticky vol-of-vol, and early signs of credit stress.
Topics explored:
- Diverging signals between the Heart Rate Variability and Early Warning System models.
- The VIX futures curve and the impact of its current shape, especially as it relates to the front of the curve and spot VIX.
- Index rotation shifts between low-beta indices and high-beta technology.
- Implied correlation tracking at historic lows as implied vol on individual stocks keeps climbing – are we priced for perfection?
- Widening credit spreads and more evidence of “risk off’” activity in interest rate markets.
Here we go!
