I recently was asked by a subscriber if I could provide him a “short-hand” characterization of what happened in markets during the first half of the year. After thinking about it for a few minutes, I responded with the following: “A low-volatility grind higher based on hope.”
The low volatility part is rather obvious, as the CBOE Volatility Index ($VIX) has stayed in a very tight range throughout most of the first half of the year. In fact, there have only been a few times where we’ve seen the VIX spike this year, and each time it did, it has come back down swiftly.
The measure of volatility or “fear” in the market now is near historic lows. The following chart shows the low volatility.
Meanwhile, the Dow Industrials, S&P 500 and NASDAQ Composite now trade at or near all-time highs. Interestingly, those new highs have come on a steady ascent that’s largely followed along with the 50-day moving average. That’s the “grind higher” part.