We talked about our 1st death via 100 cuts (our May Entry into VIX Options) OUCH.
We knew this was a game of patience and timing.
Upon releasing our video last week, the entry was ripe...
Today, after a major spike in FOMO equities (Think: Tesla up 200 points...then down 300) we got the breakout we wanted.
THE VIX: DO OR DIE MOMENT.
We cover the: fundamental story. timeline of entry. technical breakout take-profit zones the BONUS TAKE PROFIT.
BONUS READING -- INSIDER'S VIEW
This spike in the VIX is causing huge risk management issues at firms worldwide. Why? Because it rose WITH the stock market today. Usually, this is not the case. (Usually: Stocks go up, volatility comes down)
Why is this a problem?
Because of the risk models at EVERY INVESTMENT HOUSE. Risk gets managed by models. These models scan for volatility . If volatility increases...your risk goes up considerably.
EVEN IF YOU ARE A BULL AND WANT TO BUY TESLA , YOUR RISK DEPT -- WONT LET YOU.
So...it means less buyers in the markets. BIG MONEY BUYERS.
The portfolio managers have to "pare the risk" and cut their winners, trim their losers.
WHICH LEADS TO MORE SELLOFFS. ---> Which lead to...
You guessed it.
Higher Volatility .
And on goes the cycle until the flushing finishes.
This is NOT A LINEAR GAME.
It's a tornado followed by a hurricane --- inside long-only portfolios.
VIX IS A PROBLEM. (for bulls)
VIX IS A KINGMAKER. (for those that study, plan, prepare, time-it-right, and risk manage)
_____________________________________________________________________________________________________________ Thinking of doing a professional-quality-LiveStream on Trading View...covering equities, bonds, BTC , macro... Please let me know if this would interest you.
(It takes alot of energy, time, money to do it right...would need to have strong community response to set this up...hopefully this makes sense)
Bottom line, the VIX bottomed on November 26th 2019 @ 11.42 the whole while stock markets hit all-time high nearly 2 1/2 months later(2/19) despite COVID-19, that by itself is bullish for VIX and bearish for stocks albeit there was a lag, and no Fed intervention. VIX maxed out @ 85.47, 5 days before (3/18) the stock indices bottom (3/23), a leading indicator bullish for stocks. Recently, it made a corrective low on 7/6 @ 24.92, 1 week ahead of most the stock indices hitting a rebound high (some on 6/8) while the Nasdaq hit an all-time high despite economic conditions dwarfing the Great Depression. All this during fed intervention and talks of continued stimulus. From 7/6 low to today's high the VIX jumped over 35%. The area above the recent low (24.92) and yesterday's low (26.87) are very important for the bullish case, it does seem the stock indices are poised to go much lower after a corrective bounce since the appearance thus far is impulsive. The only stickler thus far is the Put/Call ratio soaring to 1.232 earlier today after being as low as .50 area yesterday morning, currently .857. If in fact the stock market topped out yesterday, no continued stimulus-intervention will save the it from market forces of fear and greed psychology, everything else is minutia. If lows are violated there are bullish seasonal tendencies for stocks through Friday 7/15 and may lapped into 7/22 , aside from seasonal influences trend changes sometimes occur at the beginning and middle of month. Consequently, that's seasonally bearish for VIX, downward thrust projections may be as low as the 23 level, though I'm doubtful of further decline.