Just a quick note today. I am actually writing this post from the on the heels of today’s sell off we are seeing some very interesting contradicting signals from the equity markets:
VIX, while the VIX was up today it did not move as hard as the SPX fell. That said it did have a nice little pop at the end of the day. At the same time we saw volatility on the options is way pop to near panic levels at close to 105% at 30 days to expiration
At the same time TLT seems to be topping out and hitting resistant (the long bond) and volatility on bonds got completely crushed.
This signals that the market is not sure where it is heading. VIX is saying look out, TLT is saying bottoming out. My thoughts are that we have further to grind down but we may not see the ‘pop’ that many traders are expecting. In the end though, I have little clarity here and am not sure which way things end up this week.
The Trade:
At least not in the near term. Again, Iron Condors seem like a decent trade here. When we do bottom out the bounce might be rough as we rally back. Another thing to note is WTI. As WTI rallies, there is a good chance that the SPX diverges from crude.
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