VIX Slapped

The Fix is In?   Better yet the VIX is in?  I covered this topic over three years ago:  The FIX is IN

This mornings massive Spike off the morning lows brought with it such  a vigor and a confidence that had me scanning for news.  Was there another Russian Jet shot down?  That spiked stock futures.  Had a another Ebola patient toured NYC bowling halls and night clubs.  Perhaps a  thimble size country had decided, without warning, to take 30% of its residents savings?  Or maybe the government abruptly decided to shut down, the market loved paying all those government workers to stay home for a week.

But I saw no such news.  On the contrary I saw a lot more of the same.  The same Pavlovian Dog action.  Buy the Dip.  Buy the F'ing Dip.  Buy Buy Buy.

Today provided yet another slap in the face for market participants.  And while all the bears out there were busy cheering this mornings brief downside, someone was dumping VXX call options like they were lit M80's.

It's stunning to see over 70k worth of options trade hands with over 70% of the action initiated by the seller, aka,  SELL ORDERS.

On the flip side those on the other side of the action are buying hand over fist on the ask.  BUY ORDERS.

This all coinciding with a complete collapse of the VIX and $VXX.


Throughout this rally off the 2016 lows I continue to see and comment on the intra-day $VXX action.  We know its down 99.8% from the 2009 highs, but its a great intra-day indicator of whether the market is ready to pull back, or if the morning dip is just another spot where the rabid buyers are ready to strike.

Today the buyers struck, and boy did they ever strike.  And while they were busy buying the heck out of the dip, $VXX call options were getting thrown down the stairs, as if the market knew they would never get back up again.

I don't like being conspiratorial about the markets, but lets face it the Central Banks are already gaming the largest markets in the world: The currency and Bond Markets.  Yet the one that has the most implications as far as confidence is concerned is the equity market.

I'll leave it at that.  I remain skeptical of this rally off the February lows,  yet the VIX, and intra day the $VXX,  is telling the market to buy that dip.  That plan has worked out quite well the last two months, and from the lows in March 2009.

See you in the chat room.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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