Yo Pit Crazies,

I still can't believe a full week of CPI, PPI and two Treasury auctions produced half a percent in the S&P 500. SPDR S&P 500 ETF Trust (SPY) finished about $4.00 above where it started Monday. Crude sits in the low 80s and nobody found a reason to sell anything.

There was plenty to sell on if traders wanted it.

The President demanded compensation from Iran on Monday, CENTCOM stood up a new drone task force on Thursday, and the Houthis put six ballistic missiles into the Yemeni port of Mokha on Friday.

Traders looked at all of it and did nothing. That's how bull markets act. Congress even spent the week asking about morale aboard the USS Abraham Lincoln, and that's usually the story you get when there's no worse story to run.

Bonds Did All the Work This Week

Treasury sold $25 billion of 30-year paper on Thursday at 5.216 percent, the highest auction yield since 2001. That came one day after the 10-year auction cleared at the highest financing cost since 2007. The long bond closed Friday at 5.27 percent, right at the top of its 52-week range.

Nobody in Washington is fighting this. The House passed a stopgap through December 4 and the Senate passed its own through December 11, both at current spending levels, which pushes the whole fight past the midterms.

Fed Chairman Kevin Warsh has said he wants the bond market trading on data instead of his guidance. Read that how you like. It looks to me like he'll let yields do the disciplining Congress won't.

That brings me to what your local liquidity providers are charging for the next two weeks.

Today’s SPY term structure

Single Digit Vol Is Not Bear Behavior

Term structure is just the price of volatility at each expiration, laid out side by side. Every expiration out to August 28 is priced in single digits, which means traders are paying almost nothing for the next two weeks of movement. VIX closed at 14.25, so the front end is calmer than the headline number tells you.

Earnings were good, traders are fine with Warsh, and the presidential feed is pointed at Tehran instead of the Fed. Traders want a higher SPY next week.

The next big event on the calendar is the Anthropic IPO. The Financial Times reported this week that investors are targeting a valuation near $2 trillion for an October listing, with Morgan Stanley, Goldman Sachs and JPMorgan running the book. That would be the largest offering ever done, and it gives this market something to price for the fall.

Look for some Option Pit goodies on that soon.

In the meantime, low vol is good for stocks, and I went live Friday to walk through how we use it in Ceres Club.

Tap here to check out the service.

Hopefully this was helpful,

Andrew