Tuesday 18 February

Good Morning,

The S&P broke out of its range last week and closed weekly (for the first time) above 6100 as markets continue to climb the ‘wall of worry’. Despite this investor sentiment here remains surprisingly downbeat as investor sentiment hits 52 week lows. At the same time bearish positioning via puts is at multi year lows. The data below represents how investors see the next six months as opposed to now but the ever increasing bearish sentiment is remarkable given recent market conditions.

We are approaching a period of weak seasonality which is not something one should trade off necessarily but there is some history here in the back half of February. Short volatility bets are now the highest we’ve seen since last July before the S&P fell 10% while VIX seasonality points to higher VIX readings at this time of the year.

Earnings This Week

Statistics tell us that at some point this year the S&P will find its way to the 200 day moving average (currently near 5700). Since 1990 when the S&P did not touch the 200 day moving average in a calendar year the chances of it happening the following year are 100%. On 60% of those occasions it occurred in Q1.

MEMBERS AREA: GAMMA LEVELS AND LATEST CALLS