Why An Anemic VIX Could Be A Bad Sign For Markets

Mark Sebastian

The Option Pit VIX Traffic Light Is Green: Volatility Could Go Up.

Hey Traders,

The Russian conflict is dominating headlines …

And dragging markets down with it.

Yet in spite of the fireworks, the VIX looks rather … anemic, all things considered.

While you may think a VIX that is slow to rise could be a good sign …

The reality may be the exact opposite.

(If you don’t feel 100% prepared to absolutely crush it in a bear market, you need to join me tonight at 8 p.m. ET.

I’m going live in a special presentation to tell you about the private trading strategy I’ve been using in my hedge fund …

That will help you stay profitable in a bear market.

Is the slow-moving VIX signaling a market demise?

The answer is … maybe.

With the S&P 500 (Ticker: SPX) falling steadily throughout most of the trading day …

The VIX was rising …

But it’s lackadaisical pace didn’t seem to match the furor of the falling market …

In fact, VIX seemed to struggle to hold over 30!

Now, take this into account with what else we are seeing out of VIX …

Namely, the VIX futures curve:

The curve is still in full backwardation …

This tells me that traders are, in fact, anticipating higher volatility sooner rather than later.

In fact, a backward VIX curve is one of the strongest Green Light indicators for the Option Pit VIX Traffic Light.

Coupled with the rather-slowly-rising VIX …

This signals to me that this market downtrend could just be getting started.

Why?

Consider that the VIX typically peaks before the SPX hits its bottom.

So if we are seeing the SPX falling hard, and the VIX isn’t reacting in kind …

Then we may not be as close to the bottom as we’d like to think.

Instead of this market downturn being a quick correction, followed by a pop higher, like we have been so accustomed to seeing …

This may be the beginning of an extended trend lower …

We may see the VIX run to 40 … on a slow grind higher.

Buckle up.

And don’t forget to join me tonight to find out the best ways to profit during a bear market.

Your Only Option,

Mark Sebastian

VIX Edge

Mark Sebastian

Mark Sebastian is a former member of both the Chicago Board Options Exchange (CBOE) and the American Stock Exchange (AMEX), where he spent years mastering the art of options trading in the most competitive environment imaginable. As Chief Investment Officer at the hedge fund Karman Line Capital, Mark manages sophisticated options strategies for institutional clients. He is the author of two highly regarded books on options trading: ‘The Option Traders Hedge Fund’ and ‘Trading Options for Edge.’ Mark is a frequent guest on major financial networks including CNBC, Fox Business News, Bloomberg, and First Business News, where he provides expert commentary on market volatility and options strategies.

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