Yo Pit Crazies,
AG's alter-ego Vol Man here with my weekly analysis.
As usual, I start with my last forecast…
Last Week’s Big Call
I’m thinking of a drift to $780 SPY with very little downside action. The relatively quiet Pres Trump makes me think we get an announcement on Iran.
In the meantime, get ready for the 13 handle in VIX next week. The only issue is how the market deals with rates winding higher? Actually, we should ask how Congress plans to fund its fantasy budget with higher rates.
SPY did not get close to $780 the week of the 21st, more like $775.
I was out taking my daughter to college at the end last week but stocks could not make it happen.
This week was a bit of a wash too as traders just ran out of steam.
VIX in Zone 1 is still on the back of the milk carton as a missing person as we get closer to 1 year without Zone 1. VIX did the 13 handle for a while on Thursday after the Nvidia Inc. (NVDA) earnings permeated the markets.
The Weekly Wrap Up
The biggest number of the week is Nvidia making $1 billion in profits per day making chips. That is an insane number as it takes the prize for most profitable company on Mother Earth.
In the Debbie Downer category, Fed Chair Warsh doesn’t like inflation numbers but will do little to address the cause which are in my rant below.
For stocks, the big number is corporate profits, and they are at record levels by any stretch of the imagination. Earnings are growing and so are stock prices which is a good thing. Big Johnnie indeed!
Back to the downer category, Sec. Bessent threatens the entire bond market with “tactical” bond purchases to keep the shorts worried. Bond prices spent most of the last two weeks tanking only to rally slightly into the end of the week because Bessent spooked the bond traders.
Mini Rant
Congress came up with an idea to make Federal transfers for SNAP, ACA and everything else to states indefinite after the COVID crisis.
The states are looking to tax the billionaires to pay for the short fall as the BBB cut some of the most egregious spending.
Congress threw $1 Trillion a year at COVID and for some unbelievable reason they still are. The new Fed Chair, not unlike Milton Friedman, knows Congress is always to blame and never plans on fixing a thing.
Inflation is a monetary effect from printing money. Everyone knows it but will do nothing about it. That’s why Bessent has to kick the Bond Vigilantes.
(Every Friday, The Options Insider Radio Network’s Vol Views offers bonus volatility insights with either Mark or myself, no charge!)
SPY daily price action over the last 30 days with one-day candles. SPY Sigma (volatility per term) for Sep, Oct, Nov
SPY clawed a gain for the week with blockbuster earnings. Companies are making money and AI spending is driving everything.
Sigma vol collapsed with lows of the week. This is generally how stocks can keep grinding higher.
SPY Realized Volatility snap on Aug 28 2026
Here's what realized volatility means: It measures how much a stock actually moved over a specific time period. Think of it like checking your car's odometer after a road trip.
The odometer tells you how far you actually traveled, not how far you planned to go. High realized volatility means big price swings. When SPY has high realized volatility, the market is unstable and prone to sharp drops. When HV10 is under 10, stocks are not going anywhere.
Realized volatility is now under 12% for the last 30 days. So far, corporate profits trump interest rates in the front of trader minds.
VIX Volatility Curves
Closing VIX cash and curve Aug 28
Closing Curve Aug 14
The VIX curve is in contango with near the same VIX base as two weeks ago. The contract to keep an eye is October since that will pick up the election volatility. The curve is so steep that short term volatility expectations are very low.
(Check out Volatility 101 basics on our Option Pit YouTube channel, now streaming.)
OP VIX Zone Watch
VIX ZONE 1 9-13
VIX ZONE 2 13.01-17.99 We lived here
VIX ZONE 3 18-23.99
VIX ZONE 4 24+
VIX kept slowly dropping in Zone 2 and never stopped. The Sep VIX future is down $1 in two weeks as traders contemplate Zone 1 for the 1st time in 2026.
The fact we cannot get out of Zone 2 in 3 weeks is generally bullish SPY.
VIX 30-day chart with one-minute candles
VIX closed near the lows of the week except for Warsh talking about inflation. VIX cannot keep any bid and keeps sliding lower.
The Big Call
I’m thinking of $775 SPY for a market going nowhere next week. Iran is still getting squeezed but the Strait of Hormuz is still a problem. I’m still looking for the SOH getting open to all oil traffic at the end of the conflict and it isn’t happening yet.
Right now the average is 20 ships from the previous 100 ships. It’s getting looser but still needs full traffic.
There are no new earnings coming out to light equity fires. The Anthropic IPO is slated for September with the stock trading in October.
This is the week for a 13 VIX.
While the broad market is likely flat, Tim is still finding sectors that rock. Check that out here.
To Your Trading Success,
Andrew