Yo Pit Crazies,

Spring is creeping in here in Maine, and I spent all weekend cutting down dead hemlocks down by the water.

They had to go because they were eaten up by the dreaded hemlock woolly adelgid – little bugs that gobble sap and starve the tree to a husk. 

That got me thinking something is gobbling up every rally in this market – and making things choppy.  

What is strange is the Fed is on a course to raise rates – now a known policy – but no one knows how low stocks will go because of it.

The VIX is showing potential for big moves – let’s take a look.

A Flat VIX Curve Has Less Than 2 Points Between All the Terms

Now, you might say that sounds very general.

Look below to see the difference between each value in the VIX futures and it is close to 1 point.

An odd symptom of the is COVID-era market is that we keep seeing higher, flatter VIX term structure, which usually points to a big move in VIX, not necessarily in the S&P 500.

Edge Hunger Vol Dashboard

This signal for me is both breadth and duration.

That means the choppiness will continue, and I don’t know for how long.  Remember the VIX futures just mirror the forward volatility in the SPX, so the volatility between terms is consistently high.  

From history I know this term structure is unstable, meaning it does not last too long.

VIX will move big next time, so will it break the current range of 37/25?

I am thinking higher before lower so get ready for another bumpy week.

The Rundown

Pro Trading Room:
The Pro Room is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session. 

Richard gets into a next level stangle in the chopping market, closes a win:

 

To Your Trading Success,

AG