While the S&P 500 had a wild Monday morning, by the time I started writing this the SPX was only down about 8 points.
Yet the VIX is near 25.
Why?
Well we have 2 markets:
YOLO (you only live once stocks)….and everything else.
While YOLO drives headlines, everything else is in fact, pretty darn important to VIX.
Here is where the markets stand as I am writing this:
The Dow is off .6%, the NDX is up .25%…
VIX IS OVER 24!!!
This is because without a few stocks, the news driving mega caps like AAPL, TSLA, FB, and MSFT….
…and some tiny stocks that should be worth about 10% of the current value, this market would be down big today.
As it stands, this morning in 30 minute window the S&P 500 tanked and recovered:
It may still end up on the day, but only because of the 6 names at the top, not because of the other 494 names.
This is why the VIX is rallying so hard.
Take a look at the two on top of eachother today:
On a 50 point drop, (1.5%) the VIX went from 22.5 to 27.
This is a sign of how nervous institutions really are about the levels we are at.
The Cliche: “wall of worry’ is clearly being climbed because anytime we sell off slightly VIX pops.
I still think we are heading for a new VIX regime, but this type of behavior makes me think twice.
On a day like today, I like long the market and long VIX at the same time as a pair.
VIX is so sensitive to downturns, that the ability to win on both trades is completely within the realm of reason.
If these YOLO traders get their lunch handed to them on one of these stocks (ahem GME), we could see multiple days of selling.
VIX LIGHT IS RED
Your Only Option,
Mark Sebastian
Leave A Response