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  Market Recap & Forward Signal: Why Caution Was Warranted Last post a few days ago, I flagged concerns about a fragile market structure, excessive optimism, and the disconnect between price levels and underlying macro signals. This week, we’ve seen that caution validated. Over the past few days: The S&P 500 has slipped a couple of percent off recent highs VIX has surged by a couple of big points WIX (volatility-of-volatility) has remained elevated — a consistent red flag in my models These shifts confirm that the risks I highlighted — namely policy uncertainty , recession underpricing , and rate cut wishcasting — are starting to register in the tape. However, the news cycle remains tightly manicured, and technical forces have continued to prop the market up. There’s no major economic data tomorrow, which could make for a quieter session — barring surprise headlines. Structural Risk Remains Looking ahead, my read remains cautious: Policy paralysis isn’t resolved — Wash...
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Caution!

  Market Outlook Brief – May 14, 2025 Analyst View: Risk-Off Stance Warranted Amid Technical Rally and Volatility Signals Summary While equity markets have mounted a notable rebound following recent tariff-induced drawdowns, this recovery appears to be driven more by technical mechanics—specifically, a pronounced short squeeze—than by any material improvement in macroeconomic fundamentals. The underlying structural concerns remain unresolved, particularly the absence of policy clarity and the ongoing underpricing of recession risk. These factors suggest that the current market optimism may not be durable and that downside risk is being materially underestimated. Key Analysis Points Artificial Calm & Policy Vacuum : The market’s rebound lacks a clear policy foundation. Business and investor confidence continue to suffer from uncertainty in regulatory and fiscal direction. No significant forward guidance or reform has accompanied the bounce—suggesting sentiment, not substance, is...
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Introducing the Universal Volatility Equation (UV)

  Enter the Universal Volatility (UV) Equation, a dynamic formula that unravels the intricate relationship between these two indices and the futures market.   Why bring futures into the equation? Because they hold the key to understanding the expected mean reversion of the VIX.   Now, let's dive deeper:   1. Comparing the Indices: To analyze the indices, one of them undergoes a transformation – it's inverted, rescaled, and adjusted with a beta factor to capture the varying rates of movement between them.   2. The Futures Factor: Futures play a crucial role as they provide insights into the expected mean reversion of the VIX.   But here's the fascinating part:   - Long-Term Insights: During times of panic, when observed over a longer period, the UV is primarily influenced by the VIX. This shift occurs because the beta between the two indices increases.   - Short-Term Dynamics: In contrast, during calmer periods, the VIX tends to be subdued with...
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