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
Oil, Oil, Oil is driving the sentiment for traders. Interest rates have found a new, higher permanent area until Congress can stop spending money. The AI story is off and running again by the end of the week so expect positive vibes into next week.
New highs next week will not surprise me and an oil headline can upset the apple cart for 100 points SPX/10 points SPY. VIX should see mid 14s.
Well, well, well we got close to all time highs, but not quite there. VIX got to just the 14 handle but could not stay there. The firecrackers Iran is tossing in the Gulf kept VIX on edge and then the dam broke for stocks.
The VIX woke up! 3 month highs. Not a single, notable news item. Just boom!
Not bueno for the bulls.
VIX 3-Month Chart
The issue I saw this week was credit default rates jumped for Coreweave (CRWV) bonds. The bonds yield 15% on Friday and that is a pretty penny in this 5% interest rate land. That is near a level where folks do not think they will get their money back or just sold their bonds and said I am out of here. That makes Uncle Sam look like the average girl at the ugly girl dance. USGov bonds posted their biggest gains in months.
The Weekly Wrap Up
Iran is doing whatever it can to upset the election for Pres Trump. They are lobbing missiles willy nilly in the Gulf and somehow declaring war on the whole region. However, Gulf oil volumes are still close to prewar levels. The problem is not solved but it is still manageable.
I would say the bigger issue is AI and the circular financing around the chip sales and the customers trying to build AI centers and capacity. Hans Albrecht brought up Global Crossing in State of the Market and the giant fiber story from 25 years ago. It is not that folks did not use the capacity. It is that equity holders got caught holding the bag as Global Crossing could not finance the buildout. ATT got some cheap fiber. That might be the issue right now. My Zoom (ZM) AI indicator was down $4 on Friday after nearly touching $100 this week. That means all is not well in AI land.
Mini Rant
I find it odd that Iran is causing all this ruckus before the election hoping for the opposition to win. Somehow they would rather negotiate with the Democrats than Pres Trump. Kinda funny and makes me think who I need to vote for. Presidents for 50 years have tried to negotiate with Iran to no avail.
(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 Oct, Nov and Dec
SPY did not make a 30 day low. Remember there was no news at all on Friday when SPY tanked but the QQQ was down 2.5%. That is some serious problems in AI land. Part of me thinks this sets up for a news event this weekend, leading to a Black Monday trading day.
SPY Realized Volatility snap on Oct 16, 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. Friday’s drop was on zero news so I expect some news to come out Monday. Stocks have been very resilient up to now at low volatility and there is no reason to see that change unless something is cooking under the hood.
VIX Volatility Curves
Closing VIX cash and curve Oct 16
Closing Curve Oct 09
The VIX curve is in a very flat way. VIX truly does not know what is going on into the close. The flat curve says which way does the SPY go?
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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 leapt hard to Zone 3 for the first time in forever. It could not hold the highs because there was a shortage of news. VIX jumped on 0 news which can be scary the next day. Not always, but sometimes.
VIX 30-day chart with one-minute candles
14 VIX to 22 VIX in a heartbeat on Friday. It was quite surprising that VIX was bid all day far and above the move in SPY. My guess is that someone, somewhere had to cover a VIX short or a SPY short or an AI short gamma position.
The Big Call
For the first time in a while, I think next week is going to be ugly for SPY. Something is happening and a firm is blowing out is my best guess. I think we see sub-750 SPY and VIX to Zone 4.
The AI story is still running but as in all good things, it might come to an end for some firms.
Tap this link to see how you can trade it next week.
To Your Trading Success,
Andrew