We had a huge bullish run after some consolidation in the months ending 2011, and then the market took off into the beginning of 2012. That was in the midst of all of the concern over what was going to happen in Greece.
So, we had the potential of doing something similar in the run up to the debt ceiling deadline. It wouldn’t be out of the ordinary. It wouldn’t be something we haven’t seen before. We do have to, of course, wait and see what happens with the earnings season and the numbers that we do get from corporate America moving forward but, so far, you can see with the S&P 500 up as high as it and with the CBOE Volatility Index (VIX) down as low as it is that investors are really quite confident.
The VIX is scraping the bottom of the barrel. The VIX dipped down to a new recent low, though it did pop up above that level during intra-day trading but it goes to show there’s not a lot of concern, worry or hedging on Wall Street, at least in the form of buying a lot of put contracts on the S&P 500, and that’s there the data from which the VIX is derived come from.
So, as we look at the VIX, it’s incredibly low. Stocks are high. We’re still seeing quite a bit of bullishness out there on Wall Street, so we’re going to be watching for that to either be amplified if we do get a nice start to earnings season and we see a majority of companies coming out with better-than-expected earnings results, or it could be quashed if we see a lot of companies come out with terrible earnings results. That, on top of the looming debt ceiling deadline, could cause a nice pullback in stocks.
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