VIX at the daily view.
And we are back to the volatility dance once again. The VIX is being suppressed due to higher liquidity levels. Meaning, there are still buyers below but waiting for prices to come down. In addition, hedge funds were letting go of their hedges right after election. The post-election rally is actually one of the more classical and easier setups - which would crush the VIX. In past elections, this setup was very similar. It never really mattered who won the election. What mattered was certainty or uncertainty.
Currently, the VIX is doing "the dance." Meaning, it's back to its down period for now. The VIX is making small "bunny hops" to keep it alive. Although, with the amount of leverage in the markets, I wouldn't be surprised if the VIX is permanently elevated. Either way, the VIX is making these small jumps in anticipation for a spike later on. That said, the wedge resistance has been elevated. So, I am absolutely not expecting the VIX to skyrocket anytime soon. Market internals are still healthy and it's not like it could flip in an instant. Usually, it takes weeks to do that.
The VIX was saved by the long-term RSI support. That said, I see no RSI divergence, no ramp up or uptrend, and no big warning sign of market internals. The only probable scenario of a VIX spike is the ES and NQ being overextended. The question is: would it be a correction by price or a correction by time? Normally, I would welcome the former. The latter is painful.
In these conditions, longing in anticipation of a VIX spike would be the lower probability trade. Backwardation will be back soon. Meaning, the premium on VIX futures will be put back on which eats up potential profits. The higher probability trade is to wait for a VIX spike and short it. Why make trading harder than it already is? Your account doesn't care how hard your trade was.
And we are back to the volatility dance once again. The VIX is being suppressed due to higher liquidity levels. Meaning, there are still buyers below but waiting for prices to come down. In addition, hedge funds were letting go of their hedges right after election. The post-election rally is actually one of the more classical and easier setups - which would crush the VIX. In past elections, this setup was very similar. It never really mattered who won the election. What mattered was certainty or uncertainty.
Currently, the VIX is doing "the dance." Meaning, it's back to its down period for now. The VIX is making small "bunny hops" to keep it alive. Although, with the amount of leverage in the markets, I wouldn't be surprised if the VIX is permanently elevated. Either way, the VIX is making these small jumps in anticipation for a spike later on. That said, the wedge resistance has been elevated. So, I am absolutely not expecting the VIX to skyrocket anytime soon. Market internals are still healthy and it's not like it could flip in an instant. Usually, it takes weeks to do that.
The VIX was saved by the long-term RSI support. That said, I see no RSI divergence, no ramp up or uptrend, and no big warning sign of market internals. The only probable scenario of a VIX spike is the ES and NQ being overextended. The question is: would it be a correction by price or a correction by time? Normally, I would welcome the former. The latter is painful.
In these conditions, longing in anticipation of a VIX spike would be the lower probability trade. Backwardation will be back soon. Meaning, the premium on VIX futures will be put back on which eats up potential profits. The higher probability trade is to wait for a VIX spike and short it. Why make trading harder than it already is? Your account doesn't care how hard your trade was.
Comment:
I just double checked. I was wrong. VIX Futures already rolled into the next contract. It seems that the premium is a lot lower than I last checked - which was one week ago. So, there might not be much of a "buffer" to get through. This means that longing the VIX won't be as bad as I originally thought.