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T3’s Market Wrap: Are Traders Living in Paradise City?


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Are the bulls living in paradise? On days like today, it feels like it.

The S&P 500Nasdaq Composite, Nasdaq 100, and Russell 2000 all hit record highs yet again.

And the Nasdaq Biotechnology ETF (IBB) has been acting quite well, and may in fact finally look to challenge the all-time highs set back in 2015.

As it stands now, IBB is up over 13% year-to-date. That's not quite as strong as the Nasdaq and Russell 2000, but it's much better than the S&P 500.

Amazon.com (AMZN) got a big lift today after Morgan Stanley reiterated its overweight rating and raised its target price to $2,500, which is the highest on Wall Street. Presumably, if Amazon ever hits $2,500, the S&P 500 would be well over 3,000 with the Nasdaq well past 9,000. But that's a big if.

Interestingly, with the market slowly grinding up to new high after high, I'm surprised the VIX isn't lower.

While the VIX isn't exactly high around 12, actual market volatility is extraordinarily low.

The implication is that some traders are paying up for put options because they fear a sudden volatility spike.

But even that implication isn't so simple to rely on, because based on the CBOE equity put-call ratio, there is very little demand for put options now. Traders are loading up on call options.

There is an argument to be made that the market is somewhat overbought, but let's remember that overbought markets can become even more overbought. Maybe the VIX will actually collapse if the market stays strong — and if that happens, maybe that's the top. (sorry for all the maybes and ifs…)

Second-quarter GDP was revised up to 4.2%, beating the expected 4.0%.

The revision was the result of stronger business investment activity, which points to a positive overall economic picture. This refinitely played a role in today's positive action.

Pending Home Sales fell -0.7% in July, coming under the 0.3% consensus.

And crude oil inventories fell by nearly -2.6 million barrels. Surveyed forecasters expected a drop of about -0.7 million. Crude oil rallied in the aftermath of the news, as did energy and oil service stocks.

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