Today 01/20/21 the S&P 500 SPX made another new all-time high while the CBOE Volatility Index (VIX) continued to give a bearish divergence vs. its late November 2020 bottom. This divergence was noted in the 01/09/21 post “Early January Sentiment and Momentum Signals”.
Today the VIX held at the same level 21.40 as made at the prior SPX all-time high made on 01/08/21. The VIX rises when there’s an increase in purchases of Put options on the SPX. Put options are downside bets and are commonly used as a hedge for stock holdings. Puts are like insurance against potential losses. When a stock or stock index rises, typically fund managers will want to decrease the cost of insurance – Puts. Todays divergence indicates fund managers are still concern about a near-term broader stock market decline.
Today the SPX daily RSI and MACD also had bearish divergences. The NYSE – New 52 – Week Highs now has a bearish divergence vs. it’s 01/07/21 peak.
Traders are 50% short non-leveraged SPX related funds as the open 01/07/21. Continue holding short.