An Interersting Observation

As of close on March 12, CBOE SKEW index  rose almost 15%, yes you are reading it right 15%!!!! all in a day. That’s fairly large gain for a day when NDX was a “0” change..not a point up, not a point below…”ZERO“….S&P500 was +0.22 that’s “1/5th of a point” up, on the other hand RUT and Dow Transports were  down. Part of this rise in SKEW can be attributed to sharp pullback  in near term volatility  (VIX index dropped -9.5%) but still, 15% is a lot of move for a non-eventful day. Separately, there is 4point spread just between Mar/April VIX future premiums.

All of the above happened on a day when trading volume on NYSE was almost 20% lower than average, declining issues were outpacing the advancing issue and the down volume was higher than up volume.

After spending only 1 day into sell zone, my EOD volatility based indicator has turned into buy mode again after yesterday’s close. However, all other divergences are still continuing (though less severe after recent 90% down day).  What an interesting market. Those divergences doesn’t mean market can’t continue to go up. This are reference points that indicates that even though there is “buy the dip” mentality in the market participants, this is a fragile market. If you choose to trade on the upside be nimble and pls don’t take unnecessary risks with the capital that you can’t afford to lose suddenly. Even though VIX dropped almost 9.5% to just a point above the lowest point in past 2 years, hedges (straight puts for future months) aren’t so cheap at the moment.

Profitable Trading, OP






One response to “An Interersting Observation”

  1. […] day of more than 10% move. The volatility based indicator already gave a buy signal that I shared  before markets opened yesterday. Though divergences are still present in various market internals, during the past few […]

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