Correlations closed the week at .78, increasing .03 points week over week.

The primary developments the past week were a nearing of extreme in contango (again) combined with another 2nd percentile liquidity print.

While price has been consolidating the past several weeks, we are nearing extremes underneath the surface. On the vix-vxv contango front (<7 percentile), we believe this (as we highlighted in the post a couple weeks back) means that any further upside gains are likely to be retraced (at least in the short run).

On the liquidity front, market participants continue to shuffle their positions around madly (virtually no price change, but lots of volume across aggregated SPX components).  We have printed 3 liquidity dots within 5 trading days, when over the past year only 4 prior occurrences were spotted.  Our main conclusion on this – is that a big move is going to happen, and likely sooner than later.  For the distribution of expected returns please see last weeks post.

We hope you had a great Memorial day.

ES
EN ES