BY ANDREW GIOVINAZZI
March 19, 2025
Yo Pit Crazies,
Traders went on a shopping spree today looking for bargains as Fed Chair Jerome Powell remarked, surprisingly, that there was not a whole lot wrong with the picture he saw in front of him.
-labor market was “good”
-inflation expectations “mostly due to tariffs”
-short term pricing pressures were “easing”
-inflation is still above 2%
That was the gist I got and oh boy did we get a move from yesterday’s lows. Heck we got a 2% move twice already this week. That is exactly what my Two Way Trade strategy is supposed to grab. Well I did sell some S&P 500 Trust (Ticker: SPY) call spreads today and it is easier to hold them knowing I am long VIX calls. This is why I love Two Way Trades in EVERY market condition, but especially this one.
Back to the curious pattern in SPY and VIX. I’m going to point you to March 5th, which was a very curious day. We saw what I like to call a “bear market head fake.” We were in a correction (SPY should be down, VIX should be up) but you wouldn’t know it from that action that day. SPY ended the day up 100 points from the low with VIX in the low 20s. SPY should have been DOWN and VIX should have been UP.
SPY 30 Day Chart with 1 min candles
SPY should have been DOWN and VIX should have been UP. This can happen, sometimes. And when it does… It’s trying to tell us something.
VIX is actually lower now than on March 5th
Now for anyone watching how the market has been moving lately, the VIX being lower NOW than it was on March 5th should be a surprise. Before SPY took out the 200 day moving average (MA), VIX was actually higher relative as if traders knew that we were going lower and to break the 200 day MA. Now that we have, they are pulling in their bids for volatility. That means they are willing to spend less on options.
I am not sure if this leads to lower volatility right away but Fed Chair Jpowell’s comments did reduce the range quite a bit from what traders see in the future (click here for my live reaction video from today). They don’t see all time highs for SPY anytime soon or see making new lows either.
Those lower ranges won’t bother my Two Way Trade strategy because I only need a 2% SPY move in a month. My moonshot VIX trade on Friday was a VIX put up around 60% now and we might see 200% if the current market pattern holds. That 200 day MA around 573 should be taken this week.
To Your Trading Success,
AG
Andrew Giovinazzi
30-Year Trading Pro
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