Yo Pit Crazies,

Traders were looking for the worst out of the gate with:

French Fried Riots that also sent French debt yields to the moon.

A big Treasury auction that traders thought would be horrific. Instead it did this:

TLT 3 day chart

Traders were expecting higher rates and the bond auction went well. Maybe 5% for US Securities looks good when not long ago people were accepting 1% or in the case of Europe negative interest rates. Insane!

This was a total reversal in sentiment on the day. There is an arbiter for how traders view this. That is the VIX.

VIX is iffy on the move today

I would say there are conflicting signals and it has to do with duration.

My Skew-O-Later below shows a solid thrashing of implied volatility (just think of option price) between 10 am and the close.

The mixed signal is that the Oct VIX futures that expire on the 21st are still pricey reflecting very short term, but higher, IV prices in SPX. The VIX curve below was yesterday and today and most of the back months are unchanged but Oct still has a tickle higher in it. The blue line is the close today.

This is the big opportunity

Traders still kept stocks mostly steady even with the rate uncertainty. We were down a bit today for SPX and the QQQ but VIX only registered a .07 move higher. Remember we printed all time highs just yesterday. That is with rates at 17 year highs.

I think this rise in rates is a buying opportunity and there is some historical precedent for it. I will walk through it on Thursday. If you saw what happened the last time you will not want to miss this time.

I hope this was helpful,

AG