SPX and 10-Year Bonds
Source: TD Ameritrade

 

I am convinced that until the 10 year note and the SPX move back toward their normal correlation that we are going to have continued rough waters. The 10 year note is causing turmoil everywhere until yields stop rallying at aggressive rates, the SPX is going to have issues.

Summary:

Look for bonds and stocks to normalize, look for the VIX to fail on an SPX sell-off and then we will be at our floor. Right now the weak are being shaken out, the momo buyers. As the VIX rallies, I would be looking to sell puts in S&P 500 (SPY) around the 1,525-1,550 level as a way of getting long the market. Those that are longer term investors might look to sell a SPY put at the 152 level around the September or October time frame. I think there is a strong chance that the return on a put sold at that level works out well.

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