BY ANDREW GIOVINAZZI
May 8th, 2025
Yo Pit Crazies,
The SPDR S&P 500 Trust ETF (Ticker: SPY) is showing a rebound today following news that the U.S. and U.K. have announced a framework for a potential trade agreement. Since former President Trump is known for liking to make deals, markets may be anticipating developments related to tariffs, revenue implications, and broader economic effects — all of which could provide support for equities.
The Fed spoke yesterday and said again that they don’t see a reason to lower interest rates. That’s partly because Congress keeps spending money like it did during COVID, helping people stay home even if they can work. These messages might seem a bit confusing, but the stock market gives us clues to help make sense of it.
The VIX Curve Flattened Up Again
The VIX curve usually changes from backward, to flat, to contango when coming out of a VIX event. You could say the U.S. has been in a month-long VIX event since Liberation Day, with the SPY swinging wildly between 570 and 480 before bouncing back.
Below is the flat VIX curve from Monday, just before the trade deal with the UK was announced.
And here is the flatter VIX curve on Thursday afternoon, following the trade deal announcement:
The curve is flatter and the VIX is lower, which is usually a good sign for the market. If my guess about the Fed is right, we could see a full rally of at least 12 points. We got close before the market pulled back today.
If you missed my State of the Market session about the 9-day VIX this morning, you can watch the replay here.
However, to sum it up: when VIX9DAY is lower than the regular VIX, it’s usually a bullish sign for SPY.
We should see a bit more rally this week.
To Your Trading Success,
AG
Andrew Giovinazzi
30-Year Trading Pro
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