Election fears have been a driver of the VIX curve for months.
Over the last few weeks, those fears are consistently backing off.
The market, which can be wrong (ehm BREXIT) has begun pricing out a contested election.
Take a look at the VIX futures curve movement over the last 2 weeks:
The Blue is the curve 2 weeks ago, the green, last week, the pink, Thursday’s VIX curve.
Not only is the VIX and VIX futures falling, but the curve is flattening.
Flattening means that the curve is pricing months more alike.
The main reason our indicators could not go ‘red’ for VIX is the curve structure.
An upsloping curve, where nearer months cost more than further out months (called backwardation), is an automatic NO RED for our VIX Traffic light.
This the 1st time the light has been stuck at yellow for weeks…
I’m thinking after early November it may be years before it happens again.
The VIX light is Yellow
Your Only Option,
P.S. – The election…stimulus…and “January effect” is making for the biggest 90 days in history! It started with the Fed.