Yo Pit Crazies

This is what things looked like mid-day on Wednesday: Stocks down a bit, VIX down a bit … but something is not falling off the cliff like it should be:

Short-term VIX – VIX 9 DAY (VIX9D) – is only just dripping down.  

I think that is a problem. Here’s what to know

VIX 9-Day should start sliding

A good tell when the S&P 500 (SPX) is going to rally, is when the short-term implied volatility in the 9-day starts to dive under the VIX. The two calculations are the same, just sampling different durations – one nine days out and one 30 days out.

In bull markets, VIX9D is usually trading well under VIX. That is known as contango moving through all the terms. Right now the two terms are very close together.

The market for stocks is not ready to give up the year’s shocks.

I have a new e-book out in the coming days – Gold in the VIX Curve – that will take a deeper look at this issue. Get ready for that!

To Your Trading Success,

AG