Morning Notes — Technical Levels

Volatility: The Fed’s increased clarity on near-term policy should help reduce bond market volatility, which usually leads to a narrowing of credit spreads and reduced equity volatility as a result.  A declining CBOE Volatility Index (VIX) usually attracts investors with the key level down near 20.  The VIX declined to 26 yesterday.

SPX: This morning’s sell-off is erasing three days of gains following last Thursday’s intraday reversal at ~3,850. That level carries some technical significance, but the most important takeaway since last Monday’s (5/9) break is that the S&P 500 remains vulnerable at levels below 4,100-4,150. The SPX should be able to hurdle 4,150 in the near-term, with a push to 4,300 likely given extreme bearish sentiment and positioning indicators.  Positioning in the Russell 2000 is now 3 standard deviations below the 3-year mean.