Hey Traders,

Heading into the long weekend, I have been writing about how I thought the VIX could head below 15.

But so far, that has not materialized.

For two days in a row the VIX has been up, and the S&P 500 (Ticker: SPX) has been up!

What does that mean for volatility for the rest of the week?

The S&P 500 closed up a measly one point on Tuesday.

The Nasdaq 100 Index (Ticker: NDX) was up nicely, and even the Dow Jones — which has been a laggard — managed a decent gain.

But the VIX was up too!

What gives?

In fact, the VIX has now finished higher two days in a row, as the SPX has rallied as well:

I have two ideas about what this could mean:

1. The market is overbought, and we are heading for a downturn shortly…

I’ll believe this one if we see another day or two of VIX rallies with the market up, or if we see a big pop in the VIX on a small sell off.

I don’t really think this is the case, but I could be wrong.

2. We have non-farm payrolls on Friday, and traders are nervous.

The last couple of non-farm payrolls have been misses, and markets have actually moved on the news …

It could be that the market is looking for a big move this Friday. If the move is higher, the VIX is likely going to take a dive …

Of course, if the SPX actually moves lower, I could be wrong in my prediction, and the VIX could pop …

My take is VIX gets smoked Friday, but again, I won’t know if I am right till Friday!

Your Only Option,

Mark Sebastian