BY ANDREW GIOVINAZZI

August 9, 2023

Yo Pit Crazies,

This is the summer for VIX.

It spent most of the time under 14 as AI powered tech to highs of the year and some stocks to all time highs. Now folks are having second thoughts right as we move into the Fall trading season. Normally there have been some nasty surprises in Aug and Sep – the Euro crisis in 2011, Russian bond default in 1998, 9/11, the list goes on. Most of those came out of nowhere and generally from lower volatility levels. Sound familiar?

At this point with so much negative financial press looking for a recession around every corner, it’s not surprising that stock pulled back from 4600. My thesis is still that the COVID recovery just brought us back to where we were in 2019, which was a pretty kicking economy except the extra $10 trillion in spending by Uncle Sam. Now that the number is so big, folks are paying attention.

I found something odd during one of my classes yesterday:

VIX 2 month chart with 1 day candles

So what is the market paying attention to now?

Silver Volatility is at Two Year Lows

Silver is more of an industrial metal, so lower silver prices are generally indicative of less project manufacturing demand. Right now the July rally is coming to a quick halt. IV is so low, no one wants to buy iShares Silver Trust (Ticker: SLV). The dollar is spiking on rates, and it’s crushing commodity prices.

VIX is looking for a CPI number to give the market a bounce or a selloff. Amazingly, stocks are rarely holding 1% drops in a day. The drop always gets bought. That does bode for good performance out of SPX and a potential poor performance out of VIX.  

I like buying the cheap SLV IV. I don’t see how it stays this low into the CPI number Thursday and beyond.

To Your Trading Success,

AG