So Is Anyone Watching the Russell 2000?

Andrew Giovinazzi

Yo Pit Crazies,

The shorts on Twitter are going nuts.

They finally have a day for the Invesco QQQ Trust (Ticker: QQQ) and it was down 1.75%. That’s a drop in the bucket on a 32% rally in 2023.

The next index to catch fire is the Russell 2000 Index Trust (Ticker: IWM). It would seem Main Street is coming back somewhat.

IWM just got even for this week and is up 5% or so for the year. That is the start of something good.

Now, did the VIX like the selloff in the QQQ Wednesday?

Let’s Look at Implied Vol per Strike

What does that have to do with the VIX you say?

Well, the VIX is made up of 30 day options from 23 days out to 37 days out. The SPX Jul07 4200 strike is 2% OTM so implied vol changes there are relatively sensitive. IV has declined even as the price of the puts have declined as well:

Normally in market selloffs, the OTM puts are sensitive and the IV would pop. Right now, even with a down day in the QQQ, implied vol in SPX could not catch a bid. Rotation out of QQQ stocks and into IWM stocks left a net zero market impact for SPX.

VIX ended up closing on 2 year lows. Mark thinks VIX will get to 12. The more Uncle Sam is out of the markets, the easier it is to get there. I think we see it next week post the FOMC rate decision.

“Alea Iacta Est,” or The Die is Cast, as said by the great Julius Caesar. VIX gets pumped when the rips in SPX can happen – sector rotation is not one of those times.