The fell by roughly 50 bps on Tuesday as , the , and rates rose. This is the regime we were seeing in late March and early April. Whether this persists will depend on whether oil continues to rise and whether higher oil and gasoline prices create an inflationary impulse.
Today is the , and we will get earnings from four of the Mag 7. The dispersion trade—and the index—are living on borrowed time. The dispersion index fell on Tuesday, closing below 40, while implied correlation rose, resulting in a compression of the spread between the two. As dispersion begins to unwind, this spread should compress further, and as it does, the S&P 500 should move lower along with it.
Finally, tonight, I just wanted to note that the fate of the 1966 analog rests on what transpires over the next few trading days. The chart suggests a turn lower is due, and that should mark the beginning of something more severe than what we have experienced so far. The recent move higher was greater than the analog suggested, but again, this is more so about the twists and turns, not necessarily the levels.
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