Yo Pit Crazies,

For all of my new subscribers to Market Action, welcome. What I do here almost every day is find a misunderstood part of the volatility and equity markets and use it to figure out what I want to do tomorrow.

Well there you have it. Stocks staged a massive rally to get back to where they were just 1 week after the conflict started. Not only that, VIX made conflict low prices today and managed to stay close most of the day.

VIX 3 month Day chart with VolMan highlights

If this high volatility, go-nowhere market has you down, see what 3 Days of the Voz looks like here.

The talking heads are going crazy about the White House caving, etc… No deal has been struck and both parties provided each other a wish list of goodies. Where it ends, who knows.

I would guess Iran would want oil flowing through the Strait because the IRGC needs the cash. Iran is not the only one who can block the Strait of Hormuz. Lower VIX is still a good sign that the worse can be avoided.

Here is a way to tell the negotiations are picking up steam.

The Easiest Indicator in the World

One of the better indicators is happening as we speak: see what 3 Days of the Voz looks like here.

If you do not have Voz giving you levels, here is a VIX trick below. I want to see the space between VIX and the VIX futures widen out. That would mean short term volatility is dropping and traders expect less action in the short term. That likely will also means, despite whatever news comes out, the outcome is getting more secure.

I do not want to see the space between close up because the curve is getting flatter and then brings in more downside SPY expectations. At least more than we expect today.

The Trade: Fade the Noise

I said yesterday to fade the moves and I am still in that mode. I closed all upside today and did add a bit of SPY downside. I even closed some May VIX puts. The objection of dismantling Iran’s Offensive Capabilities and securing the Strait of Hormuz is still out there and it will stay wooly until that objective is achieved.

Hopefully this was helpful.

AG