Rarely do you see…..

Posted on 07/05/2011

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S&P implied vols trading at a discount to historical, which from my perspective warrants caution on the downside, particularly given the market’s impressive advance over the past two weeks. We went from testing (for a second time in June) the all important 200 day moving average to flirting with the May (multi year) highs in short order.

Furthermore, newsflow out of the ratings agencies (Greek rollover plan in current form – tantamount to a default? Portuguese downgrade) very high margin levels (historically), lack of passive money inflows (beginning of month), and the constant debt ceiling overhang (less than a month to go with Congressional gridlock) could lead to a quick backfill.

52 week cash VIX lows (14.30) made in late April (with S&Ps trading ~ 1370 ) and current cash VIX just over 16 and market trading just below 1340.  Do we have the conviction to make new highs? When NFLX is your market leader…… I think caution is recommended.

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