Yo Pit Crazies,

We ended the week around 3,900 for the S&P 500. That was where it was 2 weeks ago when stocks ran on the hope of a less aggressive Federal Reserve rate hike.

Those hopes were dashed by Fed Chair Powell this week, yet stocks rose back to 3,900.

I think the market is finally past the news and is looking at valuations.

That is where we find ourselves and a reason Mark and I wanted to start the Div+ Portfolio concept. The high valuation stocks are going to have trouble keeping up.

Check this out. I enclosed the chart below as a teaser …

10-day SPX with one-minute candles and realtime monthly vol charts.

There is a trick in the chart that will give a clue on the week ahead.

Onward!

SPX at the Same Place but IV at A Different Place Is Significant

Note that the red line is the July 15 cycle for volatility and traders took that number down big time from last week when SPX was in the same area. 

Granted, part of that is the weekend but not enough to warrant the break. This is the start of lower realized volatility expectations creeping into the market.

I expect to see way less action this week and for the first time in a while the VIX could get very close to 20.

Why?

Movement expectations have to drop first before the volatility does. The short-term contango in the term IVs is an expectation clue.

That should be very good for my SPYMaster program this week. Reading vol charts is a skill you can acquire in Option Pit Mentoring and will be subject matter this week.

To Your Trading Success,

AG