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ridethepig | Volatility into the electionsI should like to start with a reminder of the operational plan for the first Covid chapter. 📌 Covid Chapter I The terrain here was clear. My models were picking up on a sweep of the lows in VIX to clear the path for a +600% expansion. In order for us to manoeuvre around this we must understand how large hands move various assets at quite a precise moment. Let's continue to work through this example of the first chapter which will set the scene for our current leg. So the lows were swept in Q419 as expected to prepare the manoeuvres from that point. So the next chart should be considered here as a fortified support with lust to expand. It would only be right and proper for us to describe what comes next as impulsive, a move that was not without reason and certainly not without fear. And finally buyers ran out of steam as we approached the 85 main SWING TARGET . From 85 I was eyeballing a retrace towards 25. Look how easy it is to make use of the expansion. I see this as further proof of the enormous vitality of overprotecting support/resistance. If you 'know' where are the stops, you know hot to make use and expose with an appropriate reply. This was one of my favourite calls. 📌 Covid Chapter II This is clear proof that we are in sync with lockdowns and covid providing the manoeuvres. As we enter into the eye of the storm for the second wave, sentiment is definitively turning softer, although this case is much more complicated. If buyers remain passive above the 44/45 highs then we can see a well-timed massage from stimulus. In other words, we need the moves to happen before the elections and are running out of time. Buyers have developed a considerable appetite, bankruptcies are coming and complacency is repeating itself. We have two possibilities here existing for the terrain in Covid Chapter II. The breakout of the highs in this consolidation block to unlock a re-visit of 85 resistance assuming things go tits up in the coming days/weeks. Sellers of volatility have nothing immediately in play because of covid and contested election risk. The only correctness of the thesis comes from stimulus, which is an expectation now for after the elections. Thanks as usual for keeping the feedback coming 👍 or 👎
CBOE:VIXLong
by ridethepig
3
ridethepig | Surfing the Vix⚠️ Chapter IV: Vix and microstructure ⚠️ For those following the swings in Vix since 2019 you will know we are tracking for the overprotection from sellers and how to try to get rid of the 'all is back to normal' sentiment. This is a shorter update than the previous three chapters, intentionally aimed at casting some light on how sellers are overshooting support and how risk 'may' appear in the microstructure. So let us start by recapping the swings between the starting point of the expansion which set this all in motion: Capitulation waters clearly represents a manoeuvre which is closely intertwined with microstructure and liquidity game theory and indeed must always be so because of the nature of free markets. Nevertheless, there are traces of overshoots to the downside . For example when sellers went overboard to sweep the lows underneath 12 in attempt of opening the single digit block: Buyers loaded and created a strong basing formation as pointed out in chapter II. In the area where sellers overshot is a strategy you will notice me using often. Play through the charts and notice how minimal drawdown was required at the base ( for which we gave incredible respect ) and because we had to keep in mind the unavoidable possibility of economic cycle inversions. Here is the final example in the recap after we exploded towards the 85 final target as called from 12 (+500% and a historic move in volatility). "VIX Completing the Swing to 85" Intending to meet a possible barrier at 38 and 25, only now does it become clear as to why price stalled at the highs instead of developing a three figure vix print. No matter what happens, this has and will remain three superb chapters of effortless unravelling of the soft retail and unaware institutional money . The spare room to 100 remains open. I think the 'everything is back to normal' crowd are too hasty in this and do not realise the tsunami of bankruptcies and debt on the horizon as we enter into year-end and 2021. Every digit retrace point in the VIX from current levels should be bought aggressively for a position way out to the 85 highs and 100 extensions for an epic news headline. This move should by now be chalked on all charts . As usual thanks all for keeping the feedback coming 👍 or 👎
CBOE:VIXLong
by ridethepig
23
VIX/VIX3M Ratio Chart A favorite ratio of mine has reached the low end of its range. The sentiment ratio which illustrates complacency and suggests a contrarian stance is warranted. Like all contrarian metrics, betting on mean reversion typically comes to fruition eventually, but tells you nothing about when that will occur. That being said, I try to be as 'timely' as possible though when I make alternative posts. What's Going On? The market is taking a leap of faith by investors who have a trust in policymakers to maintain the flow of stimulus, and for things to return to some form of normalcy. Investors are taking a leap of faith from here, clearing the chasm of economic realities. Fiscal life-support measures, Stimulus measures, and investor faith that's stopping the whole thing from unravelling. What Should I Do? Be mindful of these charts, and monitor the progression of them.. because if there's any sign that the narratives supporting investor faith start to dissipate or disappear, or that faith gets shaken, then we could get a bit of an unravelling here. In the mean time, Central Banks have our back. Best, RH
CBOE:VIXShort
by RHTrading
1
VIX compressionThe vix has a history of forming explosive price wedges. It wouldn't be a stretch of the imagination to say we're forming a new wedge here. Also, I suspect that we're on the verge of a new upward wave in volatility from here- it might just be a lower high in a new wedge. The market has gotten way ahead of itself and there are just too many new traders piling into popular stocks. They are fish in a barrel and the cork is about to get pulled. The sentiment is absurd and we now have some of the lowest put:call ratio's I've seen in my years of trading (shorts squeezed out). I'm hoping for the market to retrace 50% of the last fed rally but I would be thrilled to see lower lows by Nov-Dec. Take a look at the other chart below on VIX weekly timeframe and notice the very clear cycle lows/highs with the sine wave on stoch/rsi indicator.. We're very close!
TVC:VIX
by gghsusa
12
Risky VIXY falling wedge, as economy future uncertain. I am long on this, but it's best to wait until you can actually see it break some trendlines. This EFT will punish you if you are a long time holder. With so much uncertainty lately, what better than to take a closer look at the "Fear Index". Garunteed to lose about 20%/year, this fund is only beneficial during times of the market crashing. Basically, the SP500 crashes, this volatility fund goes up. I am keeping an eye on this, as any imminent crash will double/triple this chart. In the meantime, we can see it go lower as expected. Let's look at reasons why it would spike or decrease: Let's take a look at some destabalizers (reasons this chart should go up), and then reasons the economy might stabalize (reasons for this chart to fall) as well. Covid - a huge reason we are actually in this mess is the new pandemic gripping the world. Many US businesses have shut down, or stopped operating in the office, and started sending employees home. While many were able to hold onto their employees, the bigger businesses are even starting to let employees go within the next couple months. The smaller companies have already started that trend. Unemployement- This is real, a growing number of people unemployed collecting benefits. A new stimulus package is certainly underway, however - it is said this could take weeks, and many jobless claims may suffer. This is a perfect driver of the fear index. As time goes on, the unemployment number HAS to have an impact on this economy. There is no way around it. Even if the Fed drives money in, a crash is certain. Just takes one bankruptcy (see 2008). This brings us to my next point: Covid unemployment benefits: - Normally, a stabalizer, however there is no policy putting this back in place immediately. What happened when congress failed to agree upon/enact a budget in 2008? Crash. Hopefully this won't happen, but as time draws near, this could have a major impact on the performance of the market. Earnings - This is both a destabalizer as much as it is a stabalizer. Companies (like ATT (T)) are posting good numbers and may continue, however - we cannot ignore that the numbers have been adjusted and are lower due to the pandemic that is occurring now. We are expecting some HUGE companies to post earnings next week, and if they are below expectations, we may see some volatility crank up. Current market - We can see now, Gold futures are on the rise, SP500 is losing points for the last couple days in a row. Negative Market conditions can and will impact the outlook of the overall market. Stabilizers: The Fed - The Fed is pumping money into this economy just like they did when they doubled the Federal Reserve back in 2007, 2008. This leads to a pretty wil impact on the stock market, which is inadvertent because their main focus has been the credit market (if this fails, we're really screwed). So we can see since March, the Federal Reserve Balance sheet has increased quite a bit - almost doubling again, which may be why the market has been performing so well. Stimulus money - We are also earning some extra income for everyone, and especially the unemployed, receiving an extra $600/week cushion! This really helps out, and his absolutely needed, but this will obviously have a bigger unwanted impact later on. Regardless, for now, this helps stabilize the economy, and the market. Election year - As was 2008, but you think the sitting president wants to see a market collapse during their term? No. Expect to see as many bailout bills create as possible to avoid or minimize impact, regarless of future impact this will have. Who cares about 3-4 terms from now? As long as the President can keep up the illusion of a stable economy, it will be stable. It's as easy as that. Once people start to react to fear or greed, you can expect this stock to skyrocket.
AMEX:VIXYLong
by Shwayze
7
ridethepig | VIX Slingshot In Play 📌 Working in public has given us a live example of Volatility expanding in times of a crisis. Here it is usually a swing recap for those following. As you will remember we made good use of the initial tempo in the retreat : The show must go on... in came buyers with the counter attack and no surprises on the timing, covid was simply the trigger. To save the overshoots, we cleared all and even covered some at the 85 highs. 📌 When a deep retrace came into play it has created enough energy for a slingshot. Buyers of volatility are quite happy to exchange here at the lows as they are in full control and holding the bid at 🔑 support. Sellers of vol and the 'everything is back to normal crowds' will be condemned to liquidation. This wave 2 attempt at breaching support which has miserably failed today is a visual example of pinning your opponent. The key point is liquidations. Global Equities are complacent, retail have bought as much as they can. Large hands have cleared, since the Covid chapter II irritates them (from a retracement perspective at the very least). And it will comedown to a massacre in VIX... Seriously it is just as well we are seeing the back of VVIX...that really was a monster. 📌 How and Why these slingshots occur in VIX? When major forces on both sides clash together, it comes down to an exchange. In this case the health crisis cannot be solved via the monetary or fiscal side, shutting down the economy has caused long term repercussions. Especially with the elderly and overshoots on dependencies. In simply terms the older demographics will be forced into using savings to support families, businesses will be more defensive with capital, the issue is not solved with stimulus, it is solved with CONFIDENCE . The policy mistakes here are off the charts and may even cost Trump the election. As usual thanks for keeping the feedback coming 👍 or 👎
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TVC:VIXLong
by ridethepig
18