There is a developing situation of SPY and TLT volatility decoupling....SPY is in a steady volatility decline while TLT volatility remains flat to slightly upslope. What are the possible implications of this pattern? In the case of SPY it most likely reflects an increasing complacency with the odds of a significant decline despite the fundamental and seasonal factors hinting that down is the best odds trend forecast. In the case of TLT the implication appears to be the opposite...that there is steady or increasing anxiety regarding short term treasuries' stability in the face of massive short interest.
Its been odd recently to see SPY and TLT move in relative lockstep in the face of a low VIX environment and with SPY just pennies away from an all time high and the odds for a consolidation or pullback cycle are heightened...despite the bullish technical outlook via the Ponzo and other guidance.
