Volatility traders over the last weeks have been seeing a "flattening" of volatility structure and have not been getting the returns they were expecting for contango trades. (If you want to see contango at work, pull up a 5 year chart of UVXY. Those losses? Contango.) These charts show what is happening. The VIX (short term volatility) is rising from its...
Because of contango, patterns on UVXY are hard to read because it is a bit like a fun house mirror - you get a completely warped and distorted view of supply / demand based price movement. But when contango slows down, the distortion clears a bit. Last August the market was coming off of a depressed VIX (it was in the 10s) and volatility crept back in. On your...
UVXY contango is fairly reliable except when sustained high VIX numbers are posting, The ratio of UVXY to VIX reveals contango / backwardation channels that are predictive to the degree that any trend channel is. This is very helpful as a ratio to forcast UVXY relative to the VIX. Pictured is the current channel with an elipses and "price" tags at the upcoming...
Based on the way the UVXY has been trading as of late, it looks like it will maintain this current range (lime green lines) for a little longer. One more move up between $35-36 then it will meet the top of the current trend (green line) as it crosses the longer term downtrend that has held since 10/16/2013 (red line). I really don't think the red line will be...
Despite briefly dipping below 12, based on this chart interpretation the VIX is still poised for a rather large spike this summer. First trigger would be a move over ~14 then a push through major resistance ~19.50 - 20 would probably see a rapid ramp towards the low 30's. This would roughly correlate to a 20-30% correction in the SPX. Watch to see if the VIX can...