Market Overview Analysis by Michael Kramer covering: S&P 500, CBOE Volatility Index. Read Michael Kramer's latest article on Investing.com
The one thing that is very clear today is that implied volatility levels seem too low, given where they have typically been over the past 2 CPI reports.1-day is around 11.80, up from Friday by 3.5 points. However, the last CPI report saw the VIX 1-day climb to around 19; even in February, it was around 14. So, by that measure, I would be surprised not to see it closer to 18 or 19 by the end of the day tomorrow.
It is tough to predict how the market will respond to the CPI report, but one thing that seems clear is that the higher implied volatility climbs into the news, the more likely it is that the S&P 500 will rally following the report. So, it is not that the market doesn’t care; the mechanical forces are in charge. The higher the IV goes into the event, the more I argue that the market cares greatly.
The CDX High Yield credit spread index rose on the day to 337. Typically, the high-yield credit spread index, the implied correlation index, and the S&P 500 earnings yield tend to move together.
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