The "VIX Of Bonds" Is Giving Us A Signal
1.) MOVE – The MOVE Index is a gauge of expected one-month volatility in U.S. Treasury yields, derived from a weighted average of implied volatilities on 2, 5, 10, and 30-year Treasury bond options. This gauge is often called the “VIX of bonds.” The VIX of course is the volatility index of the S&P 500. Often times when VIX spikes, it becomes a good stock buying opportunity. Given the mammoth size of the Treasury bond market, it pays to pay attention to this measurement of volatility as well. Yesterday the MOVE Index was up +21.5%, which is a huge one-day move. The last time we saw anything near this was a 2-day move on APR 4th and 7th, 2025 and on MAR 20th, 2026. Even though this is focusing on the bond market, this move in the MOVE could be significant in terms of forward expectations of the equity market. Why? Well, what do those particular days have in common with this one? They happened to be very close to the time the S&P 500 bottomed from a correction. April 7th 2025 marked the bottom of that nasty spring 2025 correction in the S&P 500. March 20, 2026 wasn’t quite yet the bottom of this spring’s S&P 500 correction…March 30 was…but the 20th was close. While correlation isn't causation, these kinds of moments when volatility of something blows out, is often associated with a near term capitulation, presenting a buying opportunity. On Friday last week, the S&P 500 traded 6.05 BILLION shares…normally we might see 3 billion shares that trade. So that increase in volume, followed by a big up day and breakout on Monday this week is the kind of action then tends to point to institutional buying. They bought heavy on Friday, which woke up some retail on Monday. The S&P 500 might have a little more in it to scare a few more people, but I see this move in the MOVE as more positive than not.
2.) BREADTH – Market participation is always important. More tends to be better. Right now I keep hearing about how bad market breadth is. To be fair, if you’re looking at the very short term, there’s something to talk about. Only 26% of the stocks in the S&P 500 are above their 20-day moving average. Just 30% are above their 50-day moving average. Those aren’t awesome numbers, but here is where I think investors can get themselves into trouble. If you stare too closely at one indicator, over one or two short periods of time, you can completely lose sight of what’s actually happening. It’s always helpful to zoom out! On Tuesday…just two days ago…the Nasdaq closed at a new high. Meanwhile, the S&P 500 is now just -1.2% from its own high. And it’s not just in the US that things are going well. In the G10, 7 of those stock markets are within 3% of an all-time high. So let’s think about this. We’re being told to worry about terrible stock-market breadth while the Nasdaq is making new highs, the S&P 500 is about 1% from one, and most of the world’s biggest developed stock markets are sitting within a few percent of highs. In studying bull markets, you’ll find that tech tends to be a leader. That makes sense since bull markets are usually about growth, innovation, investment and productivity. Well, not only do we have that, but Mega-cap growth is leading again. Think the Magnificent 7 names. That group just recently hit a new high too! That group spent almost a year going sideways while other parts of the market took their turn leading. That was sector rotation. Leadership moved elsewhere, the bull market broadened, and now the Magnificent Seven are joining the party again. Now none of this means breadth doesn’t matter. It absolutely does. But the prices of the markets are pretty important evidence. So yes, I’m watching breadth, but I’m also watching price...and right now, an awful lot of those prices are still trending higher.
3.) PMIs – Flash PMIs are early, preliminary estimates of S&P Global’s monthly Purchasing Managers’ Indexes. They tend to provide a timely snapshot of expansion or contraction in manufacturing, services, or overall private-sector activity. So in terms of getting a gauge as to the health of business…these are helpful, and important, data points. What’s happening? US business continues to boom, with output growing at the fastest rate for over five years in September. To put the growth surge in context, barring the spike in demand following the opening up of the economy after the COVID-19 lockdowns, the latest improvement in business activity is the greatest recorded since early 2015. This doesn’t mean the stock market can’t correct some, but it does mean the business underlying the earnings of companies that trade on the stock market is quite healthy right now.
