CBOETV - Roma Colwell-Steinke, Instructor, CBOE Options Institute, looks at open interest, volatility and risk.
Equities appear to be at a key inflection point with the Dow Jones and S&P 500 indices still struggling to break out above their March 1 highs. The long yield is facing resistance for the fourth consecutive session in the 2.24% - 2.26% gap zone indicating a bid remains in safe haven treasuries. With yields trading close to the lower bound of their six month range, the high yielding utility sector could be telling us something about sentiment. YTD the S&P utilities index is in the middle of the pack with a respectable 8.25% gain, however QTD it is the 2nd top performing sector outside of technology. Over the last five sessions utilities have led all sectors with a gain of 2.6%, while just over the last two sessions they have broken out from a 10-week consolidation range. The index is now less than 1% from its all-time highs made during the week following the Brexit vote when the S&P 500 was 270 points lower. The question is whether or not the recent outperformance of the high yielding “utes” is a canary in the coalmine of a future risk off event, or simply the benefit or sector rotation where a rising tide lifts all boats. With the Dow and SPX within ~1% of their all-time highs, we shouldn’t have to wait long to find out.
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