Key facts
- Wall Street indexes have rallied for nine straight weeks, reaching successive new highs.
- Options market metrics suggest the rally is fragile and prone to volatility spasms.
- Investors are increasingly using options to position for further upside rather than seeking protection against a market drop.
- Measures of correlation in stock movements have sunk to near record lows.
- Analysts warn that the market's current state could resolve in a sharp pullback rather than calm churn.
Wall Street's main indexes have experienced a nine-week rally, reaching successive new highs. However, analysts closely watching key options metrics are warning that signs indicate the market is becoming increasingly fragile and ripe for "volatility spasms." Brent Kochuba, founder of options analytic service SpotGamma, stated that the market's current state is unlikely to resolve with just a period of calm churn, suggesting a sharp pullback is more probable. Maxwell Grinacoff, head of U.S. equity derivatives research at UBS, echoed this sentiment, noting that the market has become significantly more fragile.