I would not have guessed today’s market performance by the way it started. To be blunt, the bears failed to capitalize on a golden opportunity to cause serious technical damage.
The markets opened flat and traded down briefly. An uptrend started by mid-morning and continued steadily through the close. SPY ended up +1.52% on above-average volume. We will need to see more follow-through tomorrow, but it is possible that the major indices are starting another bounce off of the 50-day EMA.
The VIX got crushed today. The VIX (spot) index fell -11.73%, completely retracing yesterday’s move. VVIX fell -6.57%, after having hit 103 yesterday. I would have preferred to see a value >110, but 103 is a lot better than a peak in the mid-90s. In general, the greater the fear level, the more likely a solid bottom is in.
As you can see from the chart below, the VIX term structure fell across the board and contango steepened. The greatest damage was at the near end of the curve. VIX June futures contracts (which settle on Wed, June 19) fell -8.05%.
I tweeted this morning that I added to my short position on volatility by buying shares of XIV. As long as the market continues to show constructive behavior, I will continue to add to my position.
Today’s charts are below, courtesy of StockCharts.com and Trading Volatility.
Disclosure(s): Short volatility