The R word crept into stocks, and opportunity is popping out

BY ANDREW GIOVINAZZI

March 2, 2025

If some of my Option Volatility Jargon is vexing, our Glossary is here.

AG’s alter-ego Vol Man here with my weekly analysis. As usual, I will start with my last forecast…Keep ready for my surprise for next week!

Last Week ending Feb28:

The Big Call

Zone 3 VIX close is a big deal but over the last several weeks stocks have rarely followed through. There is more confidence data and PCE inflation data next week. I don’t see how any of that helps at the start of the week. Nvidia Corp (Ticker: NVDA) reports the 26th and that might provide a shot in the arm for the market. I think stocks trade lower early in the week as the news is likely not helpful but we stay at higher ATRs and daily ranges of 75 points or more SPX. The market needs some stabilizing force in the short term so progress on Ukraine, a consistent D.O.G.E. message or policy will help. I don’t see all time highs this week but 5900 is now 1.5 days away on an 18 VIX. VIX is likely to hit 20 as the data will likely be more of the same that brought stocks lower in the first place.

Weekly Wrap up

I am giving myself an A. The only reason it is not an A+ is that the ranges were closer to 100 per day SPX. Stock definitely made a move into a more volatile gear as the week progressed.

The story this week is still softening economic data. I thought Nvidia Inc (Ticker: NVDA) would help but that only lasted 30 min on Thursday. Reality is sinking in that this administration has to cut 1 Trillion Dollars from spending and that means a 0 GDP growth year. Long term that is good but we need Congress to help. On Thursday the market did not like it, and stocks took the brief rally and killed it. Ukraine is back to the drawing board for now.

The iShares Barclay 20+ Year US Government Bond ETF (Ticker: TLT) made new highs this week. All of the numbers were bearish as bad economic news is bad again. Home prices are dropping as is demand, the consumer is slowing and the Fed is more likely to lower interest rates is my guess. The market has to unwind 20 years of run away USGov spending growth. All parties own it. There is a chance now but stocks are looking at a very uncertain future. The can has been kicked down the road as far as it can go.

Note that Friday’s trading action gave Voz a two-fer on her Trade Plan. Pretty nice.

The Options Insider Radio Networks Vol Views is a little extra volatility insight with Mark or myself every Friday.

SPX daily price action over the last 30 days with 1 day candles

SPX Sigma (volatility per term) for Mar, Apr, May

SPX had no good economic news to stand on, save NVDA earnings. I know this is hard to believe since the Fed has screwed up market signals since 2009 but in the old days stocks went down on less economic growth. That and D.O.G.E. trying to save $1 trillion and GDP should halt to a crawl. SPX made lower highs and lower lows all week. That is “old” normal.

Short term IV jumped and is making new highs every day and higher lows. This is not a recipe for lower short term implied volatility. Some better news needs to break to stem this tide.

SPX realized volatility snap on Feb 28, 2024

Realized volatility for 10 days (HV10) is now 15.10%. The 60 day realized (HV60) is 13.09 Average True Range (ATR) has been very high still as the market gyrates on any news and from SPX action into the close Friday that does not look like it is going to end.

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VIX Volatility Curves

Closing VIX curve, Feb 21, 2024

Closing VIX cash and curve, Feb 28, 2025

The VIX curve is in a slight contango but flat back to front with a $1 difference between the near and far end. VIX cash is in between the long and short end of the future curve with the market throwing its hands up in the short term for the direction of VIX. Up or down by 3 points is the likely move to expiration. That also puts 16 VIX as a likely low.

Basic Vol 101 on our Option Pit YouTube channel

OP VIX Zone Watch

VIX ZONE 1 9-13

VIX ZONE 2 13.01 TO 17.99 We touched here

VIX ZONE 3 18-23.99 We are here

VIX ZONE 4 24<

VIX is in Zone 3 and spent most of the week bouncing up and down in that zone. We got very close to Zone 4.

VIX 30 day chart with 1 min candles,

VIX is in a higher plane. The drop at the end of the week in VIX was suspicious AS WAS THE KILLER SPX rally. VIX went to a new gear this week and there does not appear to be an end.

The Big Call

Zone 4 will happen this week. SPX will make new lows. Rates will make new 2025 lows. The market has to shake 10 years of overactive Fed and USGov policy. That is going to take time and the fallout is usually violent. 5700 SPX will not surprise me. There are positive threads but we need to see more play out to get to 6000. $300 range in SPX is nuts but what I am going with.