Correlations closed the week at .37 declining .17 day over day and .18 week over week. 

The .5 range that they had been clustering in for the better part of a month has been breached and now we are effectively back to where we were a month ago (on the chart below the bluest dots are the most recent prints within the last 20 trading days and the greenest dots are the least recent prints, pink is the current print).  The charts below tells us that we are in a very normal volatility environment – it is saying that on a 20 trading day time frame you can expect about a 2 point difference between realized volatility and the current VIX. Declining correlations are consistent with lower volatility with a (slow) upwards bias for price and this is what we believe is the most probably path forwards at the moment.

Given this assessment we believe that there is a strong probability we will higher than today’s close by around one percent ten days from now, supported by a variety of the ratios we track:

If we come across any additional data which invalidates this thesis we will provide an update.

Thanks and have a great week.