The Option Pit VIX Traffic Light Is Yellow: Volatility is likely to move wildly.

The SPX topped out on Thursday around 2 p.m. ET. And you could see it coming.

We are at the top of some kind of short term short squeeze right now…you can see it in the VIX futures..

Take a look at this chart of S&P 500 and VIX futures:

Since Thursday at 1 p.m through Friday’s close, S&P 500 futures are actually up….

So are VIX futures – by a full point. That is nothing to ignore.

It is a clear sign that traders no longer trust the FOMO rally to keep going. Rallies end, at least for a few days, when volatility starts to correlate with the underlying.

It’s also notable that VVIX (the vol of VIX) has moved up pretty consistently since bottoming at the beginning of January, not touching lows when VIX touched new lows.

While I am not sure 3400 is on the cards anymore, I think we are 100% due for a 200-day moving average retest and then a “we’ll see”  once we touch that.

Short SPX and short VIX is a very good trade right now.

Your Only Option,

Mark Sebastian