Upside Warning comes through again

#VIXIndicator Here we go with the second surge of this Upside Warning, and a day after my long call spread expired, of course. Once again I did not put enough conviction in it, since I failed to put a new long call spread on during yesterday’s lows. I will get the timing and expiration date right someday!

Upside Warning in effect

The #VIXindicator has been updated. Accordingly, we’re looking to open at new all-time highs on SPX. I have been rolling call spreads back into put spreads.

Click “Home/REFRESH” above to keep right-column features updated.

Upside Warning, SPX all-time closing high

#VIXIndicator As if we needed more confirmation that this market is bullish.

Volatility plunging

#VIXindicator After the shortest Downside Warning ever, today we should have an Upside Warning fire. These warnings are less powerful when we are already so close to recent highs, and in this case all-time highs. Although SPX is wavering, VIX is dropping and SVXY soaring. Dow and Nasdaq a bit stronger than SPX. RUT is down.

New VIX highs overnight

#VIXIndicator Vix hit 16.30 early this morning, besting the Apr 17th high by .02. Click “Home/REFRESH” to keep VIX Indicator and other features updated.

With a new downside Warning hitting yesterday, a return to the 2400 area is unlikely for several days or weeks. Selling short-term call spreads is best bet…. further expiration dates may risk getting caught in the bounce. Going long puts or put spreads is riskier as further downside movement may not be as rapid as yesterday. But it could be! Protect your long positions.

Downside signal, Upside Warning is canceled

#VIXIndicator, #SPXcampaign
The VIX crossed 13.03, which is 25% above the 2-day closing low. This cancels the upside warning and sets us up for the possibility of a downside warning. We now need to be cautious of further weakness, but also the possibility that, without a full downside warning in effect, that we may bounce from this week’s lows. We’d have to reach 14.34 today for a Warning to go into effect.

I will be looking to manage some pressured put spreads today.

VIX Discussion on Schwab Weekly Commentary

This week VIX, also known as the “investor fear gauge”, fell to its lowest level since Dec. 27, 1993. While some investors look to VIX as an indicator of market volatility or as a contrarian indicator of market direction I thought it might be useful to simplify what VIX is and how it can be used.
VIX is the ticker for the Chicago Board of Options Exchange Volatility Index. It is a computed index that is calculated using the price of options on the S&P 500. It measures investor expectations for market turbulence going out 30-days and is used as a hedging tool for bullish investors.
To hedge a portfolio against market moving events, investors that are long stocks can go long the VIX, through an ETF or buying options on the VIX itself. If a correction in the market occurs, the VIX can spike higher resulting in gains that will offset losses in a portfolio.
Another use is to interpret VIX as a contrarian indicator. When VIX falls to extreme levels, such as what we currently have, it can signal that investors are too complacent. That can imply that everyone is already long the market and new buyers aren’t to be found. In that case, a “bump” in the stock market could quickly lead investors to over react and the market could over compensate to the downside.
While it’s a useful tool don’t use the VIX as an indicator of the market’s future direction. A low VIX doesn’t signal a market reversal is imminent. Piper Jaffrey technical analyst Craig Johnson recently noted on CNBC that when looking at historical data on the VIX, the last nine times the VIX fell below 12, the market had rallied about 75% of the time with an average return of about 4.5%. He says, “I look at this and say, it’s low, but this is a positive sign, and the VIX is not a good gauge for picking tops. It’s a better gauge for picking bottoms.”
One last note, since the VIX was created, the emergence of leveraged ETFs give investors other ways to hedge portfolios and different investments. If you want to know more about how you can buy ‘insurance’ for your portfolio and whether it’s appropriate for your investments I’d recommend discussing it with a qualified financial advisor.