Market On Open, Monday 30 September

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The Curious Case Of The Vix In The Night-Time

by Alex King, CEO, Cestrian Capital Research, Inc

Well, the Vix keeps on heading higher, and the S&P has yet to suffer very much. This is an unusual combination suggesting that at some point one of them is going to reverse, and with gusto I suspect. That means either a vol crush to the benefit of equities, or a big equity dump to satiate all those puts that have been bought. I myself find it pointless to try to guess which - that just gets in the way of preparing clean charts! - I prefer to follow each individual chart as a closed system. The best guide to seeing what the S&P500 might do is the S&P500’s own chart.

Today is quarter end, and amongst the many strange pressures on the index is the JP Morgan Hedged Equity fund family’s hedging behavior. This is a relatively obscure but important drive of short-term price in the S&P. You can read a great explanation of this phenomenon by Robert Balan, here.

Below we run through our analysis of the S&P500, Nasdaq 100, Dow Jones, Russell 2000, bonds, key sector ETFs, oil and volatility. You can use these charts as context for longer-term investing, or as directly actionable input into short term trading decisions. Any paid subscription here gets you access.

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