One Day At a Time

It’s easy to forget how long Willie Nelson has been writing songs and releasing them into the world. Today’s musical metaphor takes us back to 1965 and an album called Country Willie - His Own Songs. Strikes me as a quaint title in hindsight. At the present moment, I am drawn to the opening track, One Day At a Time.

“I live one day at a time, I dream one dream at a time

Yesterday’s dead and tomorrow is blind, And I live one day at a time”

Markets seem to be singing those lyrics recently. Up one day, down another day and kinda going sideways after the rush higher that started at the end of July. We’ve been referring to this as “rest and digest.” Just when we thought all the lights had turned green, the VIX Mix has bounced back and forth between bullish and neutral this week. Yesterday was back to a neutral 57% with seven bullish components and three in the red.

That’s bull/neutral/bull/neutral so far this week and based on how the SPX futures are looking pre-market, we may get back to bullish to close out the week.

The backbone of the volatility complex (the VIX and VIX futures term structure) remain solidly supportive of risk-on positioning. With the August contract off the board with its expiration on Wednesday, the term structure remains in strong contango with almost five points from front to back and two points of premium between September and spot VIX.

Looking at the premium of VX30 (constant maturity VIX futures) to VIX, we are sitting at the 87th percentile after getting all the way to the 97th at Monday’s close.

A lot of smart people are getting nervous about the potential for pullback in equities before the November mid-terms. Weak employment, stubbornly high interest rates, nagging concerns about inflation. The list goes on. Yet markets have not yet slammed into that wall of worry. What to do? Update your plan for any possible market turmoil. But you may want to also take it one day at a time.

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