The Option Pit VIX Light Is Red, And Volatility Will Drop.
While the VIX had a nice intraday pop on Tuesday, in the end, the index closed only marginally higher than it opened.
But that doesn’t mean all is well.
I have been watching the Russell 2000 (Ticker: RUT) the last few days, and the Cboe Russell 2000 (Ticker: RVX) — the VIX of the Russell 2000 — is starting to make some moves.
Here is what I am seeing.
While the VIX itself ended the day on Tuesday kind of ‘meh…’
(Remember, coming off of a long weekend, you can generally count on the VIX going up about 0.8 anyway, so a 1.20 gain is not a lot.)
The RVX has really begun to scream lately, and is now trading at nearly 25!
Chart courtesy StockCharts
What’s more, the spread between RVX and VIX has exploded:
Once this relationship spikes, it can keep going, and it tends to not be a good thing for the Russell 2000:
While I think the move in the RUT over the last three days is a bit overdone, it is possible we could be heading for more downside.
Your Only Option,