Yo Pit Crazies,

Yesterday was Thursday and today is Friday. Congratulations Andrew on figuring out what day of the week it is!

Lately the Thursday-Friday trade has been an up-up move for stocks. After 2022 all anyone can think of is some hellish selloff back to 3600 SPX. All the folks who bought nothing at 3600 SPX are waiting for it to happen again.

They might be waiting for a while. Investors were waiting for the Fed to stop raising. They stopped this week,  so all of the money looking to buy is getting in now. Market makers are ready.

20 Day SPX with Jul and Aug Sigmas below

How do I know?

There’s Been No Measurable Vol Compression for SPX in the Jul/Aug Time Frame

My students ask me why I look at volatility. My answer is the vol tells you what traders see, not what they think. Right now the solid rally has led to no real mid-term volatility compression. So, traders are reluctant to lower vols because there are no steady upside sellers. 

If paper is not providing enough upside juice to the market makers, IV cannot go down. Witness today a solid SPX rally with VIX higher. The liquidity provider will “drag IV up” as the market goes up.  That is the way of a one way market.

The fact the IVs are staying bid in Jul and Aug means this rally has legs. Even though VIX is low for the year, it’s the relative vol that’s important. SPX is simply moving too fast in direction for IVs to drop.

I have said many times here that higher IV is for a market that can go up as well as down.  The fact that IVs are stuck here, means we will see higher numbers. A Thursday rally into Friday has been a staple the last few weeks, and I see no reason for that to change.

It does make the payout slower for my Weekly Profit Cycles strategy, so I’ll replace a few VIX puts with SPY calls. At this rate we’ll see 4500 by the 4th of July. I added several long call strangles to OP Mentoring and my Pro Group Thursday.

Buying the top?  We shall see.

To Your Trading Success,

AG