BY ANDREW GIOVINAZZI
May 22nd, 2025
Yo Pit Crazies,
The Big, Beautiful Bill has failed, and after months of debate, the best Congress could come up with is more spending and a higher deficit. That’s right—Republicans managed to cut taxes while increasing expenditures, and Democrats, true to form, simply boosted spending. Sure, there may be a nuance or two, but I had hoped for more. Now, I know better than to expect much at all. In the end, it will be the bond market—not Congress—that sets the limits on what can actually be done.
There was a minor sell signal yesterday, but at this point, income tax revenues are barely enough to cover the interest on the national debt. I’m not sure how much longer that can be sustained. None of the D.O.G.E. recommendations have received a vote in Congress yet.
Since the bill passed, the market reaction has been mostly muted. It wasn’t strong enough to rally stocks, but not weak enough to trigger a sell-off—at least not yet.
So, how’s the best market indicator holding up? Let’s take a look.
VIX is selling off!
The VIX curve is shifting from flat to contango, and the VIX itself is falling toward the lower end of Zone 3. This suggests that the major fear in the market is fading. If it drops back into Zone 2—below 18—we can say the worry phase is truly behind us.
VIX curve on May22nd 2:10 pm ET
The Senate now takes up the bill—likely adding more spending along the way. If, by some chance, they improve it and rein in the costs, both stocks and bonds would likely respond positively.
10 Day VIX chart
That’s a big “if” as the debate continues. Traders are beginning to price in lower short-term volatility, so expect more subdued market swings for now.
Now Here’s a Goody!
Peloton Inc. (Ticker: PTON) has seen a surge in call buying recently. I’m holding some July 18 $7 calls at $0.69. There’s speculation about a potential takeover, and with 3 million digital subscribers, the current market cap values each customer at around $800—which seems fairly reasonable.
To Your Trading Success,
AG
Andrew Giovinazzi
30-Year Trading Pro
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