Shutdown rumors push VIX futures up to 6 month highs

BY ANDREW GIOVINAZZI

December 20, 2024

Yo Pit Crazies,

“It’s the most wonderful time of the year,” sang Frank, Sammy, Dino, Nat, Andy and a host of other classic singers. Andy was not a Rat Packer but he could sing a Christmas song like nobody’s business. Those guys knew their business.

The present Congress only knows about spending to get reelected. They know their business but it is not helping the average American it is helping themselves.

Mark put out a 100% winner in the iShares Long Term US Gov Bond Fund ETF (Ticker: TLT) on Wednesday when he went live for the FOMC meeting. Big calendar items are a form of Special Situation. Any event that stops time and options from functioning normally is Special to us option traders. Yesterday in this news letter I thought the range in SPX would drop from the 200 point day we had on Wednesday. Today’s range is barely 100. Still 1% up and 1% down is a move. Stocks really could not make up their mind.

I think this week brought into focus how hard it will be to tackle the spending issue in Congress. If the bond market sneezes, equities get the flu. Stocks went on a honeymoon since Nov 5th and now the honeymoon just got messed up by the bad old boyfriend. Investor confidence went right down the hole with Fed Chairman Powell saying rate cuts for 2025 are looking less likely. Maybe the reason was the massive, stupid spending bill Congress kept doing every year, including this one.

Cue the selloff and today’s news did not help.

What we want to know if it is over. So it is the most Wonderful Time of the Year again, The Santa Rally.

Click here for an indicator that might help.

I like to go to Old Reliable in the 9 VIX and VIX

Granted this indicator did not do much for me into the FOMC meeting, when VIX9D was in the basement. No one was expecting a deviation from the .25 point cut. We got that but it was the sadness that followed that tripped up massive euphoria.

Right now 9 Day VIX, that is the short term SPX IV using the VIX calculation, is very flat with 30 Day VIX. That historically is a transition. As in which way do we go? However we did close with 9 Day VIX slightly lower. On balance that is bullish stocks but really it is too flat, as in the same price, to lean long or short VIX yet.

Today will give us an indicator. If the shutdown does not materialize and a not crazy spending bill passes, the market should like that but VIX not like that. In general i want to see the 9 day VIX break sharply lower faster especially since that is over the very time sensitive holiday.

9 Day VIX collapse means we are back to “The Most Wonderful time of the year”. Stay tuned for more Zero Theta news to follow.

To Your Trading Success,