Yo Pit Crazies,

If you have not checked out Trade to Close, look at some of these raving reviews from this week:

With stocks moving around, there is even more opportunity to Trade the Close so check it out tonight.

Speaking of moving around, check out VIX and the 3-day rally it has taken on.  I have a 3-day rule for VIX, and I want to see 3 up days before I believe in any rally.   Why 3 days? Well, from the observation that is usually how long it takes traders to forget 1 off event.  If the VIX rally lasts for 3 days, something is new in the air.

As Griff, Frank, and Mark have been writing, interest rates keep going in one direction, up.  Markets don’t like things going in one direction for too long, even stocks!  Today we had top tick VIX numbers and darn near closed there.

5-day VIX chart with 1 min candles

Here’s what is important in the VIX going into the close.

The VIX curve is still flat into the close on Tuesday

The chart below shows the Oct, Nov, and Dec future all relatively flat to the VIX cash which is the green line. Most of the back months are within 1 point of VIX cash.  Dr. Russell Rhoads, aka Dr. VIX, says a flat curve is when all future terms are within 1 point of VIX cash and I agree with him.  You can hear him occasionally on Vol Views with Mark and me on the Options Insider Radio Network on Fridays.

My Easy Take on the VIX is this.

The VIX curve in Contango means VIX is declining

VIX curve flat, VIX is more likely to move up or down

VIX curve backward means VIX is increasing

VIX curve on the close Oct 3, 2023

VIX curve in contango means all the VIX futures are higher than the VIX cash.  VIX curve in backwardation means all the VIX futures are below the cash.  Mark and I will do a webinar on this soon.

The bottom line for now is the market is still nowhere close to panic mode.  I did buy some VIX call butterflies for cheap in the Trading Desk but if I don’t get a bigger pop, they are easy to exit or I can buy a bunch of VIX puts against them.  This market selloff has been very orderly and there really is a lack of bid for stocks in most of the S&P 500.  

A stock I have on in the Easy Trade Button is near COVID-19 lows for no reason that I can tell.  That name is Medtronic Inc (Ticker: MDT) and it pays a nice dividend.  I think that is part of the problem.  Who wants dividend-paying stocks if bonds are going to yield 5% plus again?  That is the pickle we find ourselves in.

To your trading success,

AG