Triple header

#VIXIndicator Since 1999, what happened this week has happened once previously: a Downside Warning going into effect after it had been canceled, with no Upside Warning in between… and then that happening AGAIN. It’s a “triple-header” of Downside Warnings (DW).

The Downside Warning was reinstated on Wednesday after being canceled Monday. The DW that preceded the big drop was on February 24th, and that was a double-header already, after the first DW on January 27.

Double-headers usually result in the SECOND drop being deeper than the first. That certainly happened this time, with the second drop being exceeded only by the 2008 financial crisis. The only triple header before now was in 2007, when the second warning didn’t go as low as the first, but the third went lowest of all.

So we don’t have enough data to build a historical model of what we are in now. But it’s interesting to see the history of these market double/triple dips.

Below is a chart of all occurrences of doubles/triples since 1999:

Screen Shot 2020-05-15 at 7.25.20 AM

So much for that.

#VIXIndicator The Downside Warning was reinstated at the close Wednesday, as VIX closed over 25% higher than Monday’s close.

SPX skip

#SPX1dte Pretty sharp move at day’s end, but IV on tomorrow’s expiry is only 22%. I’m skipping this as tomorrow could be a sharp bounce or a sharp drop.

#VIXIndicator would have fired an upside warning today if the close was calm. This is why it takes 3 consecutive days of VIX closes before it fires… too many head-fakes with only 1 or 2 days.

Downside Warning canceled

#VIXIndicator The VIX closed below the 78.6% retracement, so that cancels the DW. Crazy stuff on a day with jobs numbers like that. If we can close well Monday and Tuesday it will set up nicely for a further rally higher.

Largest gap open since 2014

#VIXindicator As I said below, this is the first time I’ve had an open gap breach a short strike on the #SPX1dte strategy, which I started in December 2018. Today’s SPX open price was 2.40% below Friday’s close price.

It got me thinking, how often has that happened?

Well, it used to happen fairly frequently, when the SPX price was below 2000. It happened on a fairly steady basis up into 2014.

But the last time it happened was April 10, 2014, when it opened at 1,830.65 (-2.22%). Since then, today was the ONLY day that SPX gapped 2% or more.

Needless to say a Downside Warning fired today as well.

Downside Warning canceled

#VIXIndicator Forgot to note that yesterday the Downside Warning was canceled when $SPX hit all-time highs. $VIX hasn’t dropped a lot, however, so it may not mean all-clear ahead.

Highs and lows

#VIXIndicator New $VIX highs, new $SPX lows today. SPX now negative on year, lowest levels since January 6th. Highest VIX since Oct 10th.

Downside Warning in effect

#VIXindicator The $VIX closed well over 25% higher than Thursday’s close (2-day closing low) so a Downside Warning took effect. Highest VIX readings since October 10th. Expect further downside in the market in the coming days or weeks.

Upside Warning reinstated

#VIXindicator We kicked off a “minor” Upside Warning last night, based on the small VIX spike from Jan 3 and 6. These occur when a volatility spike cancels a previous UpW but no Downside Warning comes. In the past, they often signal continued momentum higher.

Upside Warning canceled

#VIXindicator The Upside Warning was canceled this morning with the VIX spike. We can now watch for a high VIX close to trigger a Downside Warning, or if we can close back below 12.68 we can look for a reinstated Upside Warning.