Did the USGOV Wag the Dog Friday?

Daily Pit Stop [fstp, logo, header] April 14, 2024 [volman, vol man, vol,] Did the USGOV Wag the Dog Friday? Hey OP Crew, AG’s alter-ego Vol Man here with my weekly analysis. As usual, I will start with my last forecast… I am staying on the movie train this week. Catch a great film Wag the Dog. More on this later. [fstp] [If some of my Option Volatility Jargon is vexing, our Glossary is here.]( Last Week: “VIX closing at or near highs is something for concern. My view is if the geopolitical stuff dies, VIX dies with it. The WH will walk back Ukraine talk this weekend since that is what they normally do after saying stupid stuff. CPI number is the big day on the 10th which i expect to be 100 points market moving for SPX. I am leaning long SPX in Weekly Profit Cycles and overall short VIX.  I have a solid hedge in SPY put spreads but i don’t think they will pay. Expect sideways movement to Wednesday, with VIX holding above 15 and then get smoked post CPI. If the Ukraine gets jiggy, SPX down 100 and VIX over 20 in two shakes of a lamb's tail.” Well let’s see how I did? Pretty good except too good. Here is my Saturday text before Iran went nuts. “Well I did sell some SPY put spreads and still hold some with VIX call spreads but the selloff was only down to 5100. Not enough for a big score. SPX easily moved 100 points and VIX hit 19 but it was not Ukraine, it was Israel/Iran WWIII. Why announce that missile strike? It seems to me it was a diversion from the poor inflation report. VIX was tickling the 14 handle on Thursday getting ready for SPX to bounce when the Middle East news hit the tape Friday morning.” “The inflation news was not good for the rate cut folks. Historically rates are in the right place with the rates over the last 10 years artificially low. The Fed is still stuck fixing that mistake. Anyone buying groceries or just about anything else understands prices are not dropping. Oil and gold are starting to move higher too. But for all that, on Thursday’s close things were ready to resume the upward SPX trend and then the massive VIX spike Friday.” Wag the Dog except that it is happening I set up Weekly Profits Cycle to hold SPY put spreads and I am glad I did. The news over the weekend can take VIX to 25. There is no telling how high volatility will go and for how long. That is the simplest lesson here. This is a very rough turn of events. It does appear the USGOV knew what was up and tried to dissuade Iran but to no avail. [fstp] SPX daily price action over the last 30 days SPX got to within 1% of all time highs before the Mid East news hit the tape. SPX was down 1.6% at one point with VIX rallying above 19. SPX lows of the month and only 2.5% from all time highs. Stocks sold off but not a lot. [fstp] SPX sigma (Vol per term average) levels over the last 30 days. Sigma Vols closed at one month highs and have never recovered from last week’s Ukraine Wag the Dog moment. You can see from the chart the sigma vols were dying fast on Thursday before the news rewoke the Vol gods. The 10-day realized vol is moving higher at 13.01. That is a 40% increase. There is no way around the market moving now. It is very possible, likely even that the easy bull market of 2024 is coming to an end. Instead of the vol crushing steady SPX rally, we get choppy sideways action and a big swinging SPX more like Mar of 2020. [fstp] SPX realized volatility snap on Apr 12 2024 VIX ZONE 1 9-13 VIX ZONE 2 13.01 TO 17.99 VIX ZONE 3 18-23.99 VIX ZONE 4 24< The front end of the curve went just backward Friday before backing off to the current state. To me this is a flat/backward front end in contango. Expect more choppy markets but not freefall for SPX yet.[fstp] Closing VIX curve, Apr 12, 2024 [fstp] Closing VIX cash and curve, Apr 05, 2024 Basic Vol 101 on our [Option Pit YouTube channel](. [fstp] VIX 30 day chart with 1 min candles VIX did not stay in Zone 3. That does lead me to believe that the move was algo driven by panic on what could be a very sad Geopolitical moment in the Middle East. I do think the Thursday rally with VIX drop was the way the market wanted to head. However, a backward VIX close is always cause for concern, even a small one. I don’t buy more VIX puts in backwardation or any vol products until VIX drops out of backwardation.  I do see a more volatile week for SPX as the geopolitical risk goes nuts with potential for limit down days. Expect a very illiquid market and VIX to 25 or more. A few prayers would not hurt either. [Weekly Profit Cycles is opening for a quarterly subscription if you want to learn to trade VIX/SPY exclusively. The last 11 Opens in WPC have been nice win]( s so getting paid to own SPY puts in an up market is something anyone can learn to do, - AG  [logo, pit profits] Want to find YOUR winning fit? Give our Customer Care Team a call at [1-888-872-3301](tel:/1-888-872-3301) Monday-Friday from 9 a.m. - 5 p.m. EST. Or email them anytime at [support@optionpit.com](mailto:/support@optionpit.com)  [logo, fvix, header,] The market is scared... Hey Traders, In today's video, we'll cover: - The scenarios I see playing out in the S&P - 5 Stock Watchlist - Where I see Gold and Oil going - Bonds... [ded]( [Click here to watch the full video!]( - Mark  [frep] Ticker of the Week! Hey Traders, Have you seen the movie Air? If not…you should… One, it is a great movie. Two it tells the story of the explosion of Nike onto the basketball scene. Which brings us to the stock of the week. Nike has had a really rough last few months. Since December it is down 25%. WIth the stock hanging around 90 bucks is it time to jump in or is the stock heading to 70. [We are going to break it down..]( - Mark  [fpip] Got a Handle on Your Gamma? Hi Shoppers, We last talked about an option’s delta. You know, the option “Greek” that shows the anticipated change in the option price for a $1 move in the underlying. Also thought of as a hedge ratio for the option, or the percentage chance the option will finish in the money if the volatility stays constant. So what is gamma? [Click here to read on...]( - Licia  [fprm] Call Sign – Robot  Hey Influence Traders, Artificial intelligence (AI) is all the rage. By now, everyone is familiar with ChatGPT. When it launched in November 2022, the chatbot reached 15.5 million visits in its first week and hit a peak of 1.8 billion visits in May 2023. And more launches followed by Google, Microsoft and others. It has caught the attention of Congress, which is afraid it could drive election interference or spew misinformation. It was partially responsible for the Hollyweird writers’ strike. Like many industries, the writers were afraid AI would steal their jobs. The Writers Guild achieved assurances that companies must disclose whether any materials given to a writer have been generated by AI or incorporated AI-generated material. It has also caught the eye of the military industrial complex. And one stock has caught our eye. [Talk to me HAL!]( - Frank Don't miss when our traders go live! Get an alert everytime we open the live rooms to all of our readers for free by selecting the calendar you use below. Add Option Pit Live Events to Your Calendar [Apple]( [Google]( [Outlook]( [Outlook.com]( [Office 365]( [Yahoo]( [glossary, logo] There are plenty of terms in the trading world that need explaining. The Option Pit Glossary is here to help. Today's phrase is:  OPEX- Option expiration. This would be weekly or Fridays or any day that options expire. [ftsp] All the Right Options. The Option Pit Team brings more than 150 years of experience to you every day. 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