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S&P Closes Week at All-Time High, Correction Now Unlikely

The S&P 500 closed last Friday at 3,714.24 and closed at 3,886.83 this afternoon. That’s a 4.6% gain. Wow, what a difference a week and the biggest institutional de-leveraging event since March 2020 can make. The S&P 500 put/call ratio got to its highest point since the panicked selling early in the pandemic; it was only about 5% below this one year high, but then it subsequently collapsed quickly.

The current level of nearly 30% off the highs does not support the conclusion that markets are overstretched either, rather it suggests indexes are poised to move higher. When investors are anticipating a crash one is much less likely to happen. There is a lot of downside protection which means when there are downside moves the profits from those moves to those holding protection are swift and often re-invested long. This softens moves downward and helps the market hold key levels.

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