S&P 500

Asian shares and oil are lower, European shares are little changed, and S&P futures are fractionally in the red after gaining for most of the overnight session, perhaps troubled by warnings from two Fed presidents who warned that markets and valuations appear frothy, and the Federal Reserve may have to raise rates more times than currently forecast. The latest round of Fed hawkishness helped the dollar gain further after recent losses which earlier this week pushed it to 4 month lows.

Over the past dew days, Bloomberg market commentator Mark Cudmore has been decidedly skeptical of any rebound observed in US stocks, and overnight he did not change his sentiment despite what some have said is an attempt for the reflation rally to reassert itself. In a note titled "Why I Don’t Believe in This U.S. Equities Bounce" he explains why, giving seven reasons why despite stocks seemingly poised for a third day of gains, he refuses to BTD and chase the latest rally.

From Bloomberg

The S&P 500 Index and CBOE Volatility Index have historically moved in opposite directions about 80 percent of the time, but that’s changed recently...

As Bloomberg reports, both gauges are heading for declines this month, after the two rose in tandem in February.

That’s weakened their inverse correlation, sending it to levels not seen since April 2005...

After March/April 2005, the S&P 500 dropped around 8% (breaking down as the correlation reverted to norm)

Having become a habitual response among the investing community, with sellside research reports dedicated to the phenomenon of buying the dip which no matter what the Fed does, refuses to go away...

...  it will probably not come as a surprise that as Bank of America writes in its latest weekly client flow trend report, following last Tuesday's sharp selloff in stocks, "hedge funds & retail bought the dip", in the words of the bank.

The S&P 500, Banks, Small Caps and Transportation indices continue to climb higher, as the long-term trend remains up. The two charts below, look at performance over the past month and how each index is testing long-term breakout levels.

The chart below looks at how the above mentioned indices have performed over the past 30-days.