Why the VIX Keeps Closing Over 20
What's up, Trader's Edge?
It's Mark Sebastian, your only option.
Yesterday we saw a mixed session across the board. The SPX finished up about 0.1%, the Dow gained about 0.07%, and the Qs slipped 0.1%. IWM dropped about 0.09%. Pretty much a flat day everywhere you looked.
(To watch yesterday's video replay, tap this link.)
So why the standstill? We had a battle royale happening under the surface.
Apple (AAPL) had a strong day, up about eight bucks. NVIDIA (NVDA) climbed about 1.2%, good for $2.15. But then you look at Microsoft (MSFT), down one percent. Meta (META) down. Alphabet (GOOGL), which has been so strong lately, dropped about 1.2%.
The Mag Seven – which is really nine names now when you include Broadcom (AVGO), Taiwan Semiconductor (TSM), and the usual suspects – got sold. Money rotated out of tech and communications and into financials, industrials, and energy.
XLF had a nice day, up about 1.06%. XLI looked solid. But XLE dropped about 1.1%. You're seeing traders shuffle money around, trying to figure out what's coming next.
Where's the Safe Haven?
Gold? Not right now. Long term, yes. Near term, no.
Silver? Definitely not.
Bitcoin? It basically just correlates with the Nasdaq, guys.
So where do you run? Bonds.
Here's what caught my attention. Since late November, TLT – that's the twenty-year duration bond portfolio – has grinded lower. But since early February, bonds have become a safe haven again.
Why? Inflation doesn't look that bad. The economy looks a little soft. Interest rate policy could shift. Money is flowing into protection.
The Bond Market Is Telling Us Something
The bond market is worried. And the VIX is confirming it.
We closed over 20 for the third time in three days. Even with the SPX sitting right near all-time highs, there's noticeable fear showing up in volatility.
That tells me a big move may be coming. Some comeuppance. A come-to-Jesus moment. It could be this week or next.
We don't have major economic news this week, but we do get Fed meeting notes and PCE on Friday. We still have some earnings peppered in there. But I think this confusion has more to do with general fear about AI software and what it's gonna do to the market.
My One Stock to Watch
I want to point you toward high beta names this week.
ASML Holding (ASML). This thing moves around a ton. It's been dropping. I'm really interested to see if it finds a floor. You see ASML start to rally, the whole market's gonna rally.
The other thing I'm watching is zero DTE options. We now have options expiring on nine equities three times a week, eventually five.
The volume is astounding. Apple did 1.1 million contracts yesterday. Four hundred thousand of those expire today. The volume in zero DTE is starting to spill into the stocks themselves. These names are becoming very interesting to trade.
Your only option,
Mark Sebastian