Breaking The Pattern & Breaking The VIX

Hey Traders,

We got the market rally we have been watching for today …

It looks like the six-month “expiration week drop” pattern in the S&P 500 (Ticker: SPX) may, in fact, be breaking …

And of course, we got the vol drop I have been waiting for.

Where do we go from here?

I’ll tell you what I think is next …

Over the last six months, we have been used to seeing the week of standard options expiration be the softest week of the month for the S&P 500 (Ticker: SPX).

But … the expiration week drop in September didn’t see a subsequent rally, so I wanted to see if October expiration would bring yet another leg lower for the markets…

Or if we could actually see some bullish action into expiration.

And as you can see from today’s large white candle, it looks like we are getting a “pop” and not a “drop” this time around.

The S&P 500 is now sitting back above its 50-day moving average for the first time since September 27.

And the VIX finally gapped lower on today’s SPX rally, and is currently trading below 17:

VIX futures are still closely tracking the index, even with the VIX dropping 9% today:

What should we expect to see tomorrow?

Will the market rally?

Will the VIX fall?

I think the answer is probably “yes.”

I expect to see the S&P continue its move higher …

And I would not be surprised to see the VIX break below 16 tomorrow.

The October 18-strike puts I mentioned yesterday at $0.30 are currently bid at $0.70.

Your Only Option,

Mark Sebastian


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