WAITING FOR WEDNESDAY - There wasn't a whole lot going on in Monday trade on account of a very light calendar and today, we get more of the same. A lot of the focus today will be on positioning into Wednesday's event of the week, and maybe even month, with the Fed coming out with its next decision. There's no expectation for any changes to policy tomorrow, but the accompanying monetary policy statement will likely be the source of volatility. When speaking of volatility, we're sitting around the lowest levels on record in US equities. So naturally, all must be great out in the world at the moment right?
LOOK AT THAT VIX - Of course, this just isn't the case and without the benefit of unprecedented central bank accommodative monetary policy, stocks would be a lot lower and volatility would be a lot higher. It's true, we can't know when volatility will rise again, but it's also true that the next big move, whenever it does come will be higher, and when that does happen, stocks will fall sharply. It's one thing to argue against those who say stocks should be dropping with a super low vol reading of 15 (still well off record lows), but it's a much harder argument for bulls to make when the VIX reading is below 10 and at record lows!
NEARLY THERE - As far as the positions go, I will say what I've said for a long time now. The SPX500 is into major resistance up in the 2480-85 area. We could overshoot as markets have a way of doing, but at a minimum, we should also expect a very healthy corrective decline sooner than later. At the same time, we need to see a daily close back below 2400 to start having that conversation about the anticipated reversal being officially underway. When it happens it should happen fast, but we have waited this long and it shouldn't be much longer.
UNDER THE MICROSCOPE - Looking at the FX exposure, we have our EURUSD short and USDCAD long in play. Nothing really happened to change the picture on Monday and so nothing really great to talk about. But if I were to nitpick and draw two positives from the Monday price action, they would be that the Euro closed lower and USDCAD closed on the extended side intraday. So from that perspective, those reversals could be coming. We're not there yet, but if we start to see those reversals play out, I will be expecting some very nice follow through in the days ahead.