Volatility is now elevated beyond the Trump Syria attacks. Now we have Trump tweeting North Korea – and volatility is up. How often does volatility go up?
Well judging on the chart above, we have:
Sept: Historically volatile
Dec 31: Year-end selling
Feb 27: Trump Inauguation / speech
April 11: Today – Trump/Syria/North Korea
Now, we don’t know if VIX will contiue going up – but we were able to alert members 2 days ago of the possibility of VIX going up by pointing out that the VIX term structure is no longer in contango, but entering backwardation.
I sent a screenshot in chat of the VIX term structure (see right) – citing that I would not add a short to the VXX because it looked like the VIX term structure was creeping up — that is the front month value of 14.06 was higher than the second month value of 13.98.
This was a sign of backwardation — which is opposite of what we want for a VXX short – which is a normal contango curve.
That chart we sent out was two days ago. with near term VIX at 41.06
Here’s what the chart looks like now:
Clearly with VIX at 16 and second month at 14.62 – we are in backwardation – and elevated volatility.
One would think with volatility, markets must be crashing – yet we were actually making money on our IWM calls — about $1,000+
We cashed out about $400 — – and still have another $600 trailing.
We also sold out of some silver a bit too soon today – more on that further below.
The markets dipped once again into support at 2333 ES – just below the 2335 ES support region – running everybody’s stops before turning back up.
Previously, we were looking for a c-wave up over 2360 – but it got stuck at resistance once again – and when that happens – that usually means the market needs to go back to the lower channel somehow at 2335 ES before attempting up once more.
Of all the indices, the Russell has actually been the strongest — and that’s the one one we are long. We bought IWM calls when Russell was aroud 1358 TF — and we sold half around 1374 TF — and are letting the rest trail into resistance.
We sold out of Silver a bit too early today. I thought the b-wave possibility might playout – but the markets were able to bust through — indicating that we may possibly have a short but strong wave 2 that resulted in strong recovery within 48 hours.
If so, we would need to get back higher than the 18.45 region within the next 24 hours – otherwise the possibility of turning back down is possible.
Still, there’s now support at 18.18.
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