The market's cautious optimism is reflected in the ongoing demand for volatility hedges, despite a decline in the VIX. The persistent stickiness of the 'vol of vol,' as indicated by the VVIX Index, suggests that traders remain concerned about potential tail-risk events. This sentiment is compounded by the S&P 500's resistance around the 6,100 mark, driven by significant option positioning and the mechanical nature of recent market movements. Risk parity and CTA funds continue to play a pivotal role, while the lack of bullish catalysts and headline risks from the new Trump administration add to the uncertainty. As the market approaches the heart of the fourth-quarter earnings season and the upcoming January FOMC results, equities are likely to remain within a tactical range.
The iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) experienced a decline, dropping 1.19% to $42.24 at 15:40 on Thursday, January 23.