(Editors Note) We would like to welcome Doug Perrygo as a new contributor to the CBOE Options Hub. Doug is an independent corporate finance consultant and author/founder of the blog, VIX For The People. Doug started his blog as an online trading journal with the goal of providing market insights “by the people, for the people”. As an active trader for more than 20 years, Doug primarily trades volatility ETFs and futures. He bases his decisions on a blend of technical and fundamental analyses. Doug has a BS in Finance from the University of Maryland and an MBA from the Tuck School at Dartmouth College. Doug lives in New England with his wife and son and enjoys sailing and traveling. Welcome Doug!
The major indices started higher this morning, but turned negative by noon. By mid-afternoon the markets were sitting on yesterday’s lows. Instead of breaking lower though, markets trimmed losses into the close and SPY closed down only -0.48%.
VIX (spot) index peaked around 2pm (a lower high than yesterday) and closed basically flat. In the short term, the VIX is starting to look overbought. The VIX term structure is still in contango and VIX futures have exhibited a relatively muted response to this pullback.
It is *possible* that we witnessed a successful retest of yesterday’s lows (on lower volume). I will look for more bullish behavior tomorrow to build confidence that this is just another minor pullback. As of now, the markets have been working off intermediate overbought behavior without serious technical damage.
I am holding my short position on volatility for now (long XIV and short UVXY). As I mentioned yesterday, I will add to it as the markets show more bullish behavior. A break below 1622 on the S&P500 will have me rethinking my position.
Today’s charts are below, courtesy of StockCharts.com and Trading Volatility.
Disclosure(s):Short near-term volatility