Yo Pit Crazies,

For the most part I am quiet this week trading. I find when on vacation, as it were, it’s better to have nothing on so I can enjoy what is going on.

As Mark says, “why have the vacation cost twice as much?”

I am still watching the market, and I did not like what I saw yesterday.

A post-Fed vol pop. I expected VIX to drop post-rate announcement and it did not. That is a problem for stocks. 

VIX is now four points higher than the lows on Monday. I don’t know if it is the budget and debt ceiling or more bad news about banks.

I don’t care about the reason since the market shifted gears again.

VIX is back in Zone 3, so let’s see what that means.

Zone 3 Is The Third Quartile For VIX (19-23)

Dr VIX (aka Russel Rhoads) did a statistical analysis of VIX, and it roughly matched my Zones. That’s good news for me, since that’s what I observed over the years. 

But I had to tick Zone 3 up 1 point to 19. I think 3 years of higher vol skewed things up.

Zone 3 is bad for stocks because traders are willing to pay up for options now, and they expect things to move at a brisk rate. Traders don’t pay up for options if they don’t think things will move so this is a surprising development.

After a major announcement, like the Fed Rate Hike, I expected VIX to drop. This time, it did not. Maybe it’s the bad news that’s coming out, and a lot of SPX weakness started midday Monday on the debt talk.

I am looking for a bumpy end to the week.

The Rundown

Easy Button

I closed the JPMorganchase Corp (Ticker: JPM) calendar for a 91% gain. I highlighted the technique in Tuesday’s newsletter.

To Your Trading Success,

AG