Which direction is the pain direction in this market?

BY ANDREW GIOVINAZZI

July 6th, 2025

Yo Pit Crazies,

If some of my Option Volatility Jargon is vexing, our Glossary is here.

AG’s alter-ego Vol Man here with my weekly analysis. As usual, I will start with my last forecast…

Last Week’s Big call

Last Week ending Jul03:

Every week that goes by, it seems stocks care less about the BBB and figure the bond market will fix the stupidity that reigns in Washington D.C. Despite this being a generational opportunity to fix things, Republicans continue to fall short. Post-COVID Medicaid spending has become like an addiction for politicians—too politically convenient to cut. Meanwhile, AI is commanding the market’s focus. Usually the 4th of July gets folks happy and an early trade deal would only add to the optimism. I expect the VIX to keep drifting lower toward realized volatility, while SPY continues climbing in fits and starts. My target for SPY next week is around 620, with VIX likely settling in the mid-15s.

Weekly Wrap up

I’d give myself a C. SPY blew up to $626 on a never ending rally, far beyond what I expected. The VIX remains stuck in the 15s, even with a three-day weekend on the horizon.

The Iran/Israel situation has faded, Congress might finally push through a bill, and both jobs and inflation data are holding up reasonably well. So, is AI the hero here? I believe it is—much like how the internet helped pull the U.S. out of the post–Savings and Loan crisis slump in the early ’90s. SPY hit new all-time highs.

Overall, things seem to be improving, but government spending remains a serious issue. Will it be addressed? It doesn’t look like anyone’s willing to take it on.

My Flash 5 portfolio continues to crush it, riding the AI-adjacent wave, with two names up over 60%. I expect the second half of 2025 to deliver an even stronger run. AI and related stocks went on another tear this week.

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SPY daily price action over the last 30 days with 1 day candles

SPY Sigma (volatility per term) for Jul, Aug, Sep

Just 10 trading days ago, SPY was at $590—now it’s pushing $628. That’s a 5% gain for the year, and nothing is standing in the way except the spectre of Jul 09 Tariff deadlines. It feels like traders are trying to make up for missed opportunities in the first half, driving stocks almost straight up.

SIGMA volatility has dropped to one-month lows, but contango remains unusually wide. Traders appear to be holding onto longer-term protective options while continuing to ride the long side of their portfolios.

SPX realized volatility snap on Jul 03 2024

10-day realized volatility (HV10) sits at 8.07%, reflecting a low-volatility bull market—though you wouldn’t guess it with the VIX still hovering around 16%.

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VIX Volatility Curves

Closing VIX curve, Jun 27, 2024

Closing VIX cash and curve, Jul 03, 2025

The VIX curve remains in steep contango, with the July future down roughly $0.70—typically a bearish signal for VIX. Meanwhile, the August future has held steady, showing little movement.

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OP VIX Zone Watch

VIX ZONE 1 9-13

VIX ZONE 2 13.01 TO 17.99 ← We are here

VIX ZONE 3 18-23.99

VIX ZONE 4 24

VIX was in Zone 2 all week as stocks rallied every day on better economic and geopolitical news.

I have a great trade set up for that already.

VIX 30 day chart with 1 min candles

The VIX remains steady heading into July 9th. With ‘Liberation Day’ approaching, traders aren’t taking any chances.

The Big Call

Looking ahead to the coming week, I see SPY pushing to 630 or higher. However, an unexpected move by Trump could quickly drag it back toward 600. I expect the VIX to drop significantly after July 9th, which should help ease tariff-related concerns. Realized volatility is at one-year lows, and equity bulls remain eager to buy. Barring surprises, the market looks poised to continue climbing.

To Your Trading Success,

AG aka “Vol Man”