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The S&P 500 saw a slight bounce on Thursday, rising just 25 basis points—not a very impressive move. More importantly, the index rallied by roughly 70 basis points early in the session but gave back those gains through the afternoon. Part of the morning rally appeared to be an unwind of volatility that had risen sharply on Wednesday, as evidenced by the 1-day VIX opening around 8.
However, with implied volatility starting from such low levels, it had nowhere to go but higher, and as volatility rose, the S&P 500’s gains faded.
The Left Tail Index has been steadily rising, and on Thursday, it pulled back somewhat, likely reflecting a decline in put skew rather than call skew. This suggests that implied volatility declined more quickly for puts, indicating that some hedges were unwound early in the session.
Thursday’s price action did little to improve the index’s technical outlook; if anything, the late-day pullback highlights how much the market is struggling at this point.
Despite all the talk of rate cuts, December 2026 Fed funds futures actually rose by 7.5 basis points on the day to 3.18% and are now at their highest level since August. For now, this may not seem like a major development, but with a clear downtrend and resistance near 3.25%, a breakout in Fed funds futures would come as a significant surprise—to me and to many others.