Market On Open, Friday 13 June

DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.

The Vix Will Tell You If You Listen

by Alex King, CEO, Cestrian Capital Research, Inc

The Vix popped today as it always does when it has been trundling along at the lows for too long. The exact reason fear strikes markets and folks start scrambling to buy puts (which is the thing that pushes the Vix up - demand for >30DTE S&P500 puts) is always different but the reaction is always the same. Complacency about the future (Vix at the lows) followed by fear about the future (Vix spikes). And then, so far, calming down once more about the future (Vix starts to slide back from its high).

I personally dislike the Vix-specific instruments - your Vix futures, Vix ETFs and whatnot - I find them unpredictable insofar as they don’t seem to have a linear relationship with whatever moves are happening in the Vix itself. But I do like to use the Vix as a general indicator of whether to be buying portfolio protection (via inverse index ETF hedges, or puts on regular index ETFs) or whether to be adding to long positioning. As always we teach this and disclose personal account trades in our Inner Circle service; but in short, as with all things in financial markets, the Opposite Day strategy works for me. Vix on the floor and staying there? Something bad is going to happen soon. Vix to the moon? It probably isn’t the end of the world and probably people are going to be buying stuff again soon.

Here’s the Vix complete with today’s spike and fallback. You can open a full page version, here.

Personally I used the Israel strike-induced selloff to get out of a poorly-timed hedge (SQQQ) a tad above cost. Nobody pays us to say this but I am constantly reminded of how good the Interactive Brokers platform is vs. the tales I hear from many of our subscribers using Fidelity, Thinkorswim et al. IB offers overnight trading which at least in the major stocks and ETFs is liquid-ish albeit at the price of chunky commissions. I was all out of SQQQ by about 3.30am Eastern, thankful for the opportunity to correct an error. Now I just have an errant SOXS position to deal with!

Let’s take a look at where markets stand.