Yo Pit Crazies,

I have been stuck in Chicago since Friday, when I was originally scheduled to fly out.

It must be the cost of living in the woods on a rock by the water.  

Not Chicago.

The good part is I get to stay with old friends from my Chicago trading days. Twenty years later and it still feels like I was here last week. Old friends never change.

Neither do bear markets. And we are in one.

Here’s what to do.

VIX Is Not Making New Highs, but SPX Is Making New Lows

From experience I know this is not a good thing. 

After trading through three solid bear markets they all have the same feel.  

The SPX is in a painful grind lower for 2022.

See below.

SPX one-year chart with one-day candles

There is more volatility and now we have VIX to give us an easy indication of where market volatility is pricing.

Check out the chart below …

Vol Man is riding a higher average volatility but VIX has not made any breakout highs,  just a lot of the same. 

This is really less liquidity in the market. I learned early that bear markets are made of a lack of liquidity more than anything else.

Why? Because folks stop buying the dips.

One-year VIX with oneday candles

The direction of stocks right now is more of an orbit where small rallies are followed by small selloffs.

Stocks take the stairs down. Remember, there is still institutional buying through 401ks and retirement plans. The difference now is the individual will be less apt to play.

Strategies change a bit here.

More theta positive positions instead of the dead long options generally work better in this market.

It is a subject I will dig into Monday on OP Mentoring.

As long as I make it home!

To Your Trading Success,

AG