Hey Traders,

The S&P 500 got smoked on Wednesday, dropping to a new recent low and settling well below the 200 Day moving average:

The index gapped below the 200 and never really threatened to get back over it.

The VIX closed at 20.50 – NOT as high as on Monday, but still well above the high from Tuesday.

VIX futures are a different story:

Despite the VIX getting higher on Monday, VIX futures settled significantly higher on Wednesday than they did Monday.

They also settled in partial backwardation – VIX is above Nov, Nov above Dec.

This is a bad omen for the market.

I think we are as close to a full out flush as we have been in some time.

So what’s the play?

I’ll go into the exact details in Trading Desk tomorrow, my service where Andrew and I trade indexes against each other, notably SPX vs VIX.

But so that you know how to game plan, here’s the direction we will be going.

We want to be long downside with an upside hedge that is short vega.

I think we’re likely to be down in the next few days … but if we do get a ripping rally on some good news out of the Middle East, VIX is going to be smoked.

Again you can do this trade with me and Andrew every day in Trading Desk, which has a great trading record.  Want to know how to join me? Email my team [email protected].

Questions about that? Leave a comment below!

Your Only Option,

Mark Sebastian