it’s an all time high!!!!

BY ANDREW GIOVINAZZI

July 8, 2024

Hey OP Crew,

AG’s alter-ego Vol Man here with my weekly analysis. As usual, I will start with my last forecast…

If some of my Option Volatility Jargon is vexing, our Glossary is here.

Don’t forget our conference is 2 weeks away. Hang with Licia, Voz, Mark, Frank, Griff and Me your humble Volman.

Last Week:

“We have a start to the quarter at VIX lows. My guess is some light follow through from Friday and then fund managers jam some stocks up into the holiday. I expect SPX near 5500 again for SPX and VIX near 11.50.”

SPX did near exactly what I thought it would. However, even with 3.5 day trading week, VIX ended the week unchanged and we did not get any meaningful drop in 30 day volatility. I keep thinking we can see the 11 handle but the reality is it is not going there with $100 rallies per week in SPX.

Remember live is better than on camera, check out our event in July!

Calls for Biden to quit the race after the debate performance has yielded bupkis market wise. If anything it makes the case stronger for DJT since stocks like DJT in office. Stocks have liked Biden too as he has ridden the AI wave. Similar to Clinton riding the Internet wave. Sometimes as President getting lucky helps. Ronnie Reagan rode the PC tech boom in the 80s. My view on this is mostly that the President can mess things up. America works just fine but it can be screwed up from time to time by politicians.

Right now AI is all that matters and Tesla Inc (Ticker: TSLA) is in that race again.

SPX daily price action over the last 30 days

SPX closed at an all time high. The Invesco QQQ Trust (Ticker: QQQ) closed at an all time high. Stocks have very short sell offs and then long slow rallies. The 100 point SPX moves are still there post FOMC or jobs data. As long as the official narrative of jobs and rates are the same, SPX rallies.

SPX sigma (Vol per term average) levels over the last 30 days.

Sigma Vols closed at lows for the week. SPX 30 day volatility is now looking at Aug which is the gold line above. Those vols are at lows of the year going into a 3 week quiet period waiting for Big Tech earnings. I would expect this to be close to the lows at this point.

SPX realized volatility snap on Jul 05 2024

Realized vol is 5.77% for the last 10 days so unchanged to stay at very low levels. VRP Vol Risk Premium is still very high at almost 100% premium to realized volatility. VIX might be low but stock volatility is lower. We are trading at year low levels right now so be aware of that.

OP VIX Zone Watch

VIX ZONE 1 9-13 We are here

VIX ZONE 2 13.01 TO 17.99 We were here

VIX ZONE 3 18-23.99

VIX ZONE 4 24<

VIX closed basically unchanged for the week with only a brief trip to 13s. When VIX highs for the week are mid 13s we are in a Zone1 bull market. Stocks are going up.

Closing VIX curve, Jul 05 2024

Closing VIX cash and curve, Jun 28, 2024

The VIX curve is very steep with all the futures lower from the previous week. All Vol Products like UVXY took another hit. The Election Cycle VIX future lost .50 so the market is edging closer to the winner in the election.

Basic Vol 101 on our Option Pit YouTube channel.

VIX 30 day chart with 1 min candles

Big Tech earnings are coming in late July early August. Until then, since JB is staying in the race for now, expect QQQ to 500 going into earnings. It is hard to be bullish right now, so it is likely the thing to be. More of the same, small pullbacks with long rallies. I don’t expect much out of VIX but would like to see it tickle the 11 handle.

Weekly Profit Cycles is opening for a quarterly subscription if you want to learn to trade VIX/SPY exclusively. I am 14 for 17 for Opens in WPC. So getting paid to own SPY puts in an up market is something anyone can learn to do.

To Your Trading Success,

-AG