The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move wildly.
Friday saw quadruple-witching and the markets nicely lower, although well off the lows.
On a daily basis it seems the S&P 500 is up or down 2% at some point … only to see the index revert back to a mean of sorts.
There is an argument between traders right now…on one hand we have traders that see the banks and predict imminent doom.
On the other side are the traders who think banks are a huge scoop.
It all comes down to one chart
This one …
The big trend line that goes all the way back to January of 2022.
That has been the battleground for markets, and we have bounced above and below it for about a week now.
While the banks have dragged the market lower, tech stocks have sored.
As the banking crisis has played out, check out MSFT:
Money has not been leaving the market, it has been moving. All that changes if we cleanly break that trend line…
But if we can bounce and get back above the 200- and 50- day moving averages, we could see the S&P 500 move higher.
In that move, though, we could see QQQ under perform.
I’m buying puts on QQQ and buying calls on something like the SPDR Dow Jones Industrial Average ETF Trust (DIA), which has been under performing.
Questions about that? Leave a comment below!
Your Only Option,
Mark Sebastian