Thursday, March 16, 2017


One of the many mysteries of the 2017 market meltup is the continued rise and strength of the utilities sector ala XLU. Utilities are typically viewed as a safe haven in the same vein as bonds have enjoyed for the past  2 decades.  Price volatility is generally moderate with cycling patterns that often mirror ex-dividend dates. What we're seeing now is something different and something of a contradiction to past price correlations to SPY versus XLU.
While it's beyond the scope and ability of this feeble old brain to try and explain this new paradigm what's interesting is that the outlook going forward per Ponzo is net neutral at 18 weeks out.
This is an option traders dream come true for neutral butterfly setups and tomorrow we'll look at a couple risk/reward situations.  There are still outlier scenarios both up and down at the 4 standard deviation level but the consensus view is strongly neutral.