Yo Pit Crazies,

As I write this, President Trump is intensifying pressure on Iran to return to the negotiating table. The situation resembles a high-stakes game of chicken, especially in light of Frank Gregory’s report that Israeli actions have effectively compromised Iran’s control over its own airspace. That is another reason that looking for long term plays in short term upheavals is a good idea. 

I thought as Israel got more aggressive, that would start to slow down the VIX train. However, volatility continues to climb, with the VIX rising again since Monday as the U.S. Carrier Group positions itself in support. This is adding fuel to the fire of market uncertainty. Trump campaigned on avoiding new wars and ending old ones—so the question is, will he hold to that promise? While it’s still unclear, my inclination is that he’ll choose to stay on the sidelines.

Let’s see what story the VIX is whispering to the markets.

The VIX curve is dead flat

Typically, that signals a potential sharp move in the VIX—either up or down. While VIX curves can remain in contango or backwardation for extended periods, they rarely stay flat for long. As recently as last Wednesday, the curve was firmly in contango, and the VIX appeared to be trending below 16. But after the White House issued an evacuation advisory for the Middle East, the curve has been flattening, and volatility has been on the rise.