Pockets in Peril

The VIX Light Is Yellow, Volatility Is Going To Move Around Wildly.

Hey Traders,

On Thursday,  the S&P 500 picked a touch over ½ of the sell-off on Wednesday…

VIX sold off almost 80% of the pop from yesterday …

This is the reason the VIX light does not move on a whim … It needs to be proven right.

That said, there are pockets of this market that are in serious peril …

And there are some huge shorts out there.

Here is one …

The net results of the last two days is the S&P 500 being down about 40 points.

That’s about 0.5% per day of movement, or a VIX of 8.

But the Devil is in the details …

We have seen the S&P 500 drop 89 points, only to rally 49 points the next day.

There are some serious problems with this market …

Like I talked about yesterday, bonds are soft and equities are soft. That’s a recipe for a VIX spike like we saw yesterday.

But that combination can also lead to a prolonged VIX swell, where VIX stays elevated for a week, a fortnight, a month, or even longer…

Currently, the VIX light is still yellow … for now. That rally on Thursday stopped the light from changing colors.

However, if I had a stop light for a single particular equity, I would be flashing that one bright red — meaning it’s going to go down (remember, red light is down, green light means up, and a yellow light tells us to watch for movement).

Yesterday in my presentation “Post-Pandemic Options Trading Secret Formula,” I told you all that I had three names I am almost certain are going to drop.

I know Hannah won’t be happy about this, but I’m going to reveal the first name to you now, for those of you that didn’t make it …

Zoom Inc. (Ticker: ZM).

Thursday at 11 am ET, I walked through why I thought ZM is going to hit 200 by July.

Interestingly, during my presentation, ZM seemed to want to help prove my point by having some annoying technical difficulties! It got so bad we had to shut down the first room, and open up a second one.

ZM is just a piece of the puzzle. One of the things that is going to hold up the VIX is that we seem to have constant pockets of volatility.

First it was value, then it was mega-caps, then it was meme stocks, and now volatility is coming from stocks that made some major $$$ during the pandemic …

ZM appears to be one of the leaders …

What is fascinating is that as soon as I revealed my pick,  the stock tanked

The blue circle is when I announced the pick:

I do not think the two events are actually correlated (I am not that self-important!) … but it is pretty funny timing.

More importantly look at the intra-day volatility.

Does this look like a stock that is going to simply calm down and begin rallying again?


There are a whole host of names like ZM that are keeping volatility elevated.

I’ll reveal another today at 11.

Your Only Option,

Mark Sebastian

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