Per ]my analysis here, I'd like to point out an update that we have just set a higher low from the multiple compression low of VIX and VIX/VVIX from the mega bull run early this summer.
This is a sort-of warning shot that the market is starting to become unsettled about sustaining these prices long term. Does that mean sell it all right now? No, certainly not. This is only the first higher low on the weekly chart.
But, if we see another successive higher low in VIX/VVIX as the price action in
SPY
and
QQQ
bounce back in the coming weeks to possibly re-challenge the summer's highs if not even go past them some, it's time to start thinking about taking profits and taking a net short position, if you ask me.
That might be a month away, maybe a couple months away, it's hard to say. Just keep an eye out.
For options plays starting from yesterday (Friday 8/19/23) I'd start positioning with some positive delta exposure for the coming weeks, but keep an eye out to flatten and reverse that trade in the not distant future. Maybe we get a nice reversal to the upside to end August, but September has historically been the worst month for bulls on average.
I have a feeling that no matter what the Fed says at Jackson Hole this week, the re-positioning that happens around it after having been down in the couple weeks leading upto it, we may have a pop to the upside as big players re-hedge, and IV may well drop again as the market de-risks after digesting what they have to say.
But, as we round out August, if it appears the new IV and VIX/VVIX low post Jackson Hole is a higher low than the previous dip, I'd start flipping to have a negative delta exposure for sure, possibly for a longer term trade towards the end of the year. This could be somewhat like 2H 2018 all over again, but can't say if there is an aggressive bounce off a big low towards the end of the year. Will have to keep an eye on economic data. We're in a much more tenuous position than we were at the end of 2018.
This is a sort-of warning shot that the market is starting to become unsettled about sustaining these prices long term. Does that mean sell it all right now? No, certainly not. This is only the first higher low on the weekly chart.
But, if we see another successive higher low in VIX/VVIX as the price action in
SPY
and
QQQ
bounce back in the coming weeks to possibly re-challenge the summer's highs if not even go past them some, it's time to start thinking about taking profits and taking a net short position, if you ask me. That might be a month away, maybe a couple months away, it's hard to say. Just keep an eye out.
For options plays starting from yesterday (Friday 8/19/23) I'd start positioning with some positive delta exposure for the coming weeks, but keep an eye out to flatten and reverse that trade in the not distant future. Maybe we get a nice reversal to the upside to end August, but September has historically been the worst month for bulls on average.
I have a feeling that no matter what the Fed says at Jackson Hole this week, the re-positioning that happens around it after having been down in the couple weeks leading upto it, we may have a pop to the upside as big players re-hedge, and IV may well drop again as the market de-risks after digesting what they have to say.
But, as we round out August, if it appears the new IV and VIX/VVIX low post Jackson Hole is a higher low than the previous dip, I'd start flipping to have a negative delta exposure for sure, possibly for a longer term trade towards the end of the year. This could be somewhat like 2H 2018 all over again, but can't say if there is an aggressive bounce off a big low towards the end of the year. Will have to keep an eye on economic data. We're in a much more tenuous position than we were at the end of 2018.
Comment:
Well, October was not a great month for the market. No solid rally, just continued to slide downwards somewhat slowly/orderly.
VIX/VVIX continues to provide bearish upwards divergences. VIX itself still hasn't expanded a ton, but is lingering in the low 20s a lot lately.
Part of me wonders if we are still going to get a rally to at least get half way back to the July highs before the other shoe really drops on the market.
VIX/VVIX continues to provide bearish upwards divergences. VIX itself still hasn't expanded a ton, but is lingering in the low 20s a lot lately.
Part of me wonders if we are still going to get a rally to at least get half way back to the July highs before the other shoe really drops on the market.
I do think we have a decent recovery for October into November before hitting more turbulence, will re-assess what things look like as we get to December. It's entirely possible the market breaks the established trend of normally having a large drawdown as VIX/VVIX sets a couple successive higher lows.
Time will tell. For now, it appears we go up, though.