$6 Up Days in a Row for SPX – Most in a Year

Andrew Giovinazzi

BY ANDREW GIOVINAZZI

November 7, 2023

Yo Pit Crazies,

SPX just had its biggest run in a year. I don’t know how it will go for the rest of the week but it sure looks like folks do not want to miss the rally into the end of the year. There are some forces keeping stocks buoyant:

Congress has a speaker, spending appears restrained
Bond prices are rallying as rates fall with Jpow less likely to raise now that the bond vigilantes are back
Corporate earnings are okay
The Middle East is still the Middle East

All of these things were in flux over the month of October, some very near disaster. They all appear less so today.

1 year SPX chart with 1 day candles

How is the market pricing things into the end of the year?

There is a surprise or two.

UVIX Has Had Six Down Days in a Row and Should See a Fresh Low

After it famously exploded the day I bought Volatility Shares 2x VIX Futures ETF (Ticker: UVIX) puts, it has since moved up $17 only to drop $20 in a month. Up 50% down to over 60% as implied volatility has come crashing down. Now I am not complaining as I have a good chance to exit my UVIX puts for a profit.

UVIX 30 day chart with 1 day candles

Look below at the SPX Dec07 4500 calls. They traded as low as $3.50 and peaked at $20.00 on Friday. The IV was down every day. Monday was the lightest IV drop for the whole move in SPX. The 4500 calls are currently at 11.10% IV.

Slow moves down in IV is what I want to see in an SPX rally. Slow is sustainable. Until the upside IV gets into the single digits I am wary of the crazy upside move but it is getting there. I am also aware the selloff was mostly based on things that could happen that did not come to pass.

If the upside IV in a VIX sensitive cycle like Dec 07 keeps heading lower, the Santa rally will happen. That will make it hard on UVIX but happy for my UVIX puts I have on in the Trading Desk.

To Your Trading Success,