Yo Pit Crazies,

SPX today had its first real selloff in recent weeks on Tuesday.

A good, old- fashioned, one-way down, ride.  We closed on the lows.

What I found curious was that the short-term 9-day VIX closed lower than 30-day VIX, which I wrote about in the Option Pit Stop, our daily roundup newsletter, yesterday.

That is a very odd signal.

I’ll explain why when you click here.

The Fed Speaks at 2 p.m.

What will the Fed meeting minutes say?

Inflation is still here and the central bank is not lowering rates anytime soon.

New CPI numbers will be out in a month, looking at a one-year comparison instead of two. That should get the CPI to drop a bit.

I think the lower VIX9D means that there is no short-term,easy solution. No easy way out of this. Only time and a concerted effort to get the US deficit under control will do the trick.

Unfortunately, continued free-wheeling spending indicates the message isn’t getting across to our elected leaders, even after months of rate hikes. That is the big problem the Fed still faces.

The market is now assuming a 25-point rise this year for rates. That was enough to bring volatility from the year lows and set SPX tumbling. I don’t think the Fed needs to add the extra raise yet since inflation is rising slower than last summer. J-Pow and co. will stay the course in their minutes and there will be a modest move up in SPX this week.

Keep an eye out for the 9-day VIX moving to Zone 4 (above 24).  If we dont break that on the upside, expect VIX to fall again to 18s by next week’s VIX expiration and SPX to retake 4100.

The Rundown: What’s Trading Around Option Pit

Win the Week

Bill Griffo crushed the Invesco QQQ Trust (Ticker: QQQ) Feb24 305/304 & 297/290 put vertical and closed for a 49% gain.

Power Income Trader

Griff did it again with the SPDR S&P 500 Trust ETF (Ticker: SPY) Feb24 410/400/390 put butterfly & 400/390 put vertical closed for a 67% gain.

To Your Trading Success,

AG