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The new trend of $VIX buy signal is the third one in the last year. The $VIX chart from Figure 4 is reproduced here, without the “spike peak” buy signals, so we can discuss these trend of $VIX signals.
First some background: a trend of $VIX buy signal occurs on the first day when both the 20-day Moving Average of $VIX and $VIX itself are below the 200-day Moving Average. Conversely, on the first day that they are both above the 200-day MA, that is a sell signal.
We have addressed this subject a few times in the past, but with the equity-only put-call ratios plunging to multi-year lows, it seems appropriate to take a fresh look and review what we know from the past. As noted in the market commentary above, the standard ratio is down to levels last seen in November 2021. The weighted ratio is at a new low for this year, which is about as low as it ever gets.
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This is one of our best seasonal trades, but it doesn’t occur every year. Simply stated, if there is a selloff in the broad market of at least 3.2% at any time during October, then the end of the month presents a strong buying opportunity: Buy on October 27th (if that’s a weekend, as it is this year, then buy on the preceding Friday – which would be today, October 25th). Sell on Nov 2nd (if that’s a weekend, as it is this year, then sell at the close on the following Monday – which would be November 4th this year)...
The market has stalled out. For several days (and today is included as well), it has tried to forge through 5860 but has been unable to do so. There was a minor pullback this week, to 5760, but so far it has not been much of a problem except for the deterioration it caused in some of the market internals (more about that later). The support zone of 5670-5770 remains intact, and this week's pullback penetrated just the top of that zone, and then the market bounced higher.
The VX futures options are set to begin trading this coming Monday, October 14th. They will be options only on the $VIX monthly futures, even though there will be daily and weekly expirations. The base symbol for these options will be UX (the futures themselves trade with the base symbol VX). Since there are daily options, the symbol will also contain the letters “A, B, C, D, or E” for the days of the week: Monday, Tuesday, etc. The symbol will also contain a number indicating the week of the month, 1...5.
The “election bump” is the term that I have given to the distortion in the term structure of the $VIX futures prices. Specifically the October $VIX futures continue to trade above the prices of the Nov and Dec futures. The following article adds some insight to this condition.
