Correlations closed the week at .32 still a low correlation environment with losses lead by the tech sector (XLK). Last week we mentioned our bias was a slow upwards drift, and while early in the week that bias looked like it was on side – that has absolutely been invalidated.
The current vix print puts us in the 91st percentile of vix prints given current average correlations (ie. the $VIX is lower 91 percent of the time given the same conditions – getting to extremes though not there yet).
On a realized basis, IV sits between the 75th and 95th percentile cones, with the 95th coming in just under 25 on a 30 days basis, with the largest 30 day move realizing at about 35%.
From a pure price perspective, we have no even breached last weeks lows – and none of our metrics suggest that a short-term or otherwise low is in place. From a liquidity perspective, ie the % change of price per unit of dollar volume, is at the 78th percentile, indicating normal selling behavior, and room to get extreme. The VIX curve indicates uncertainty across all futures months (flat nearly everywhere) and this warrants caution (if long stocks / short vol). We think adding any sort of positions here is a strong proposition to get chopped around in the coming week, and want to wait until better opportunities present themselves in the data.
If things heat up this week (we would not be surprised) these are the risk levels you can expect under extremes (green dots and lower):