The Option Pit VIX Traffic Light Is Red: Volatility is likely to slide.

Hey Traders,

We’ve recently been talking about the concentration in the market.

AAPL, MSFT, GOOG/GOOGL, NVDA, AMZN, META, and TSLA are now about 55% of the NDX and close to 30% of the S&P 500.

And now they have a name – the Magnificent 7. What a great name.

But is this an omen?

Think about when the name FAANG came out. That pretty much set a near term top.

With AAPL announcing its complete dud of a head set (I’m sorry, 3500 is about as insane a price as I have ever heard) …  

And the stock taking a dive, the question is…will there be follow through?

And if there is, does it take the other 6 down with it?

And then there’s an even bigger question: if the Mag 7 start to pull back (which they need to just a touch), does that money reallocate?

If the answer is yes, then the VIX curve and the VIX at 14.70 are probably too high, and the cash index is going to pull the curve lower.

But there’s a reason – despite the rally and the intermittent lack of movement –  that the futures are trading nearly 2 points above the index.

It’s because if the money doesn’t allocate back into financials, energy, materials, and there IS some selling of the Mag 7 … we could see 4000 again in a flash.

Questions about that? Leave a comment below!

Your Only Option,

Mark Sebastian