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 expect the FOMC to surprise and not cut.

The issue is oil prices and a rate hike will not do much to change that.

10 year yields are near 5% and Congress will have a hard time funding their fantasy world.

AI is a giant wealth generator and it is cutting across all areas. The build out is employing just about everyone except for people who do not want to work.

I think we moon launch to 785 SPY next week. Bookmark it. VIX to 14.5 but only for a tickle.”

Stocks didn't quite jump the way I expected. Fed Chair Warsh raised rates, and stocks sold off before reacting positively. VIX got below 15, to 14.81, so traders like the Fed news.

I got the 3% moonshot on an FOMC standstill wrong. Even so, SPY dropped 1.5% and ran back 1.5%. My Two Way Trade strategy still paid, and that's all that counts.

The Weekly Wrap Up

Another week with 15-year-high interest rates, but stocks ended on a high note. Credit mostly goes to the Fed Chair Warsh report in the minutes. The economy's strong, but higher oil prices are the price culprit.

The earnings docket didn't have much on it, and for the most part the FOMC monthly minutes stole the show. It looks like we get one more rate hike in 2026, and the only body that can do anything about it is Congress.

Let's talk a minute about the AI story. The single biggest economic engine is now bad for us?

Anyway, I believe Frank Gregory when he tells me there's a PRC bot operation around AI disinformation. You'd think our elected officials would be smarter. AI is the growth engine right now, and the Anthropic IPO has a target on its back.

That does lead to a muted US stock market. America likes sky's-the-limit growth.

Mini Rant

The Strait of Hormuz (SOH) is back to 50% to 70% on oil traffic, but you won't hear that. Only the Houthi rebels grabbing a piece of the Saudi coast makes the news. You'd think the Saudis and Europe would do something about it, since it's their Red Sea traffic in the lurch.

I'm sure they'll form a committee. This is another good reason for the USA to take the lead in nuclear energy.

It's time for the Fed to publicly shame Congress for spending. The grift and theft going on is unreal. The Fed just giving tax dollars away to programs with no oversight is insane.

Yet no one in Congress does a thing about it. At least vacation keeps them from making things worse.

(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 finished the week higher to close at $763. The Anthropic/Houthi news killed the real rally potential. Traders accepted higher rates very fast, so the interest rate picture is likely dead for 2026.

That should be good for stocks.

SPY Realized Volatility snap on Sep 18, 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 (realized volatility over the last 10 trading days) is under 10, stocks aren't going anywhere.

Realized volatility is now under 10% for the last 30 days. Even the 3% move was an intraday, two-day move that barely registered. The 60-day reading is now below 12%, which means no negative story in the last 60 days has had any legs.

VIX Volatility Curves

Closing VIX cash and curve Sep 11

Closing Curve Sep 18

The VIX curve is in contango with a 1 point drop this week to drop below 15 for the first time since before Labor Day. That sets up a positive trend for SPY next week.

(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 We tickled here

VIX ZONE 4 24+

VIX kept jumping from the long weekend and peaked around 19 Wednesday when Warsh said there was inflation and a strong economy too. That VIX spike was obliterated by Thursday with VIX down 2.5 from the peak.

VIX 30-day chart with one-minute candles

VIX is crawling to quiet news period. With the rate scene likely set until the end of the year, we are mostly stuck with headline news to move VIX. Every rally this summer has been a fast short.

The Big Call

I was wrong, and the Fed raised a quarter point. The Fed will follow the bond market up if it keeps taking us there. Now traders know that.

Will Congress figure it out when they get the bill for borrowing $2 trillion at 5%? Total lack of Congressional leadership, since it's Congress who budgets (used to) and spends.

I'm looking for AI not to kill us this week, and to see if the sentiment changes and the USA runs some positive bots. I do think it'll be an inside week (SPY stays within last week's high and low) unless there's solid progress in the Middle East. VIX to 14.25 and SPY 770.

Tap this link to see how you can trade it next week.

To Your Trading Success,

Andrew