VIX - The 72-Handle PreludeI will reiterate again, as I have in my past posts, notably:
Nasdaq NQ - A Fundamental and Technical Warning Signal
That if you are bullish on US equities into the future and want to see a healthy economy into '24 and '25, you DO NOT want to see a new all time high to be set yet.
Instead, you want a correction.
A major correction is just that: a correction. A correction gives a number of elements an opportunity to rebalance and reload so that a new phase of markup, and thus profits for longs, can unfold.
The VIX controls a lot of things, namely the price of options. Really, what this means for most people is it controls the price of "protection," i.e. puts.
And since the VIX is now trading at a low not seen since June of '21 and in an area of accumulation that spanned 3 years between '18 and '20, if you think a new all time high on equities is coming, you're actually saying that VIX is going to trade to 5.
And you may very well be right. It's a very difficult situation.
However, net liquidity is coming out of the system, and the indexes and equities rallied from mid-June to mid-August of last year. The algorithm rarely runs the same pattern at the same time twice.
Moreover, there's a lot of problems brewing in this world with the War in Ukraine connected to Vladimir Putin and the situation in mainland China with Xi Jinping still at the helm of the notorious and unforgivable Chinese Communist Party.
There are handles a major arranged correction in the markets are not going to print on VIX.
1. VIX will not print GFC highs
2. VIX will not print the millennial-titled "Coronavirus Disease 2019" highs
3. VIX will not print 50-handles
Instead, VIX, in my opinion, will print a 72-handle.
One of the truths in the market place is the easiest and most consistent money is not only that the market goes up, but selling volatility after the dust on periodical propaganda has settled is free money.
A free money train always continues and you're never a part of it because you're trying to long MULN and Bed Bloodbath and Beyond for a MOASS.
So, let's take a look at the ETFs. There are some notable pieces of evidence in the price action that show something ought to change, and quickly.
The first is in the SVXY inverse VIX ETF, which has taken out the pre-COVID high, and by a lot.
LT short seller funds: they dead.
But a more notable case is that of the UVIX 2x leveraged bull ETF
It was 5:1 reverse split to start the year, had one bounce during the bank collapse hysteria, and then lost 80% of its value.
UVIX trades under $1 pre-split.
You're looking for a MOASS on shitcoins, but here's a real opportunity.
Notable is also that HUV, the Toronto Stock Exchange VIX (non-levered bull) ETF, is in a similar boat.
It 6:1 reverse split in February, had one bounce, and lost half its value, trading to barely over $3 pre-split.
You can care about Canada because there are arbitrage opportunities with the USDCAD currency pair and because our holidays and your holidays are not the same, like "Juneteenth," and so there is opportunity in manipulation.
What I can say is that there's an argument, if nothing else, to long volatility in extreme situations as a way of defending your long positions.
People are willing to allocate 40 percent of their portfolio to bonds that just don't go up when the market pumps and don't go up when the market goes down.
So why not hedge with volatility?
That being said, if Nasdaq goes to 9,000 points, are you really willing to hold your $400 NVDIA?
Humans never believe in what they don't see. They only believe after they've been shown, and then it's too late.
What I truly hope for everyone who has a kind heart is not only that you can preserve your money through the chaos and manipulation, but walk out of the machinations stronger, better, healthier, and with a bright future.
For this, and only this, is what you have waited for.
