Hey OP Crew,

Mostly softer economic data kept stock prices higher as rates dropped.  The odds are betting rates don’t go higher through the end of the year.  At least the odds have dropped quite a  bit.  That dropped the floor on VIX but good.

Vol Man here with my weekly analysis.  As usual, I will start with last week’s forecast…

Last week: “Most of my opinion is lack of movement in SPX with not a lot of great news.  I am looking for the 14-handle in VIX next week and 4500 SPX.  AI is still keeping the home fires burning. The BRICS currency block is in its infancy so it did not do enough to roil markets, yet. ”

Well, my 4500 was not bad considering that is where we closed.  VIX slid all the way to the low 13s and almost hit 12.  I did not see the rates going from 4.4 to 4.1% this week so that sucked the life out of vol.  VIX cash is now well below the lows pre-Fitch downgrade of US Debt.  Whatever the issue was, investors forgot it.

SPX daily price action over the last 30 days

SPX sigma levels over the last 30 days

Sigmas got smoked and in my opinion are way too low given what is going on in general.  Sentiment changes in a heartbeat.

Realized vol is 12.65% in SPX. Sigmas are lower than that out to November.  Vol is too cheap.

VIX cash closed near 2.60 lower or 4 points in two weeks as a total smash of IV.  VIX is running at a 1 year lower here.

Closing VIX curve, Sep 01, 2023

Closing VIX curve, Aug 25, 2023

VIX is now below the gap after the FITCH downgrade on USGOV.  4500 SPX test happened so who knows where we go.

VIX 30-day chart with 1 min candles

I think we see a flat VIX next week with a little move for stocks.  News is always a catalyst but short vol products via puts and short SPX with puts in the October cycle is probably the best trade setup of the year.  Pod 1/ Pod 4 is the place to learn how to set up these trades.

Let’s go.

AG