Oh Come On!
Investor, Venture Capital Background
A sharp VIX spike followed by a reversal has historically favored SPY over the following weeks when VIX was at or below 25. After a 21% spike Friday and a 7% fall today, SPY's one-week return averaged 1.10% in 14 comparable events over the past decade, with gains in 12; the next-day average was just 0.07%. Could this have been capitulation? x.com x.comÂ
A new SPY low alongside a lower VIX high often, though not always, signals a near-term reversal. A roughly 30% VIX jump makes a shallow rally likely Monday or Tuesday, but after breaking below yesterday's low following a trend-line backtest, SPY still looks headed for $750 soon. x.com x.comÂ
Equity volatility looks too cheap with the VIX in the 15s despite alarming oil and diesel headlines, such as the Saudis reportedly telling European refiners they will get no crude next month, per @zerohedge. That makes it a good time to buy volatility for October, with a spike still expected ahead of the midterms and peak tax-loss harvesting season. This is a very risky trade. x.com x.comÂ
Short dealer gamma could amplify SPY and QQQ selling as liquidity drains. SPY's first long-gamma strike is 745 next week, a possible magnet; QQQ has no long-gamma floor in frame, with vanna near 700. A bottom looks likelier next week than this week, with chop between. When strength returns, probably late October, easing should flood equities sooner than most expect: a strong November, stronger December and a Santa rally, with high beta leading into year-end. Its early hourly turn could reverse. … Show more
Comfort Systems USA and Vertiv look like juicy shorts into Friday's quarterly options expiration and Q2, because call options are holding them up. Quarter-to-date momentum stocks generally reverse after expiration; sometimes that lasts only a few days, but this could be a bigger trend change. x.com x.com x.com x.comÂ
Long-volatility products VXX and UVXY are not cheap just because the VIX is below 15, since they hold VIX futures rather than the index. The front-month future is around 17, so buyers already pay a significant premium to spot volatility, and in contango the constant rolling of futures is a steady drag. Structurally, contango favors the short side of VIX futures, VXX and UVXY over time, though volatility can explode very quickly. x.comÂ
US stocks could see a bigger decline over the next few months, as dealers are heavily short indices and long VIX futures, though that is not a timing tool. The key S&P 500 pivot is 7,620; below it lies 7,300 June-July support and, in an extreme case, the 6,878 yearly open. Seasonally, a low usually forms in October, and an election-cycle rally typically starts before the November 3 election as hedges unwind, absent black swans. x.com x.com x.comÂ
With the VIX at 14.53, US stocks are back in the low-volatility zone where it pays to trim positions and reduce risk in the S&P 500 and Nasdaq 100. VIX levels have marked every major buying and selling opportunity since 1990, from the dot-com crash to the 2025 tariff selloff: below 20 means trim, 20-30 hold, 30-40 start buying, and above 40 buy the panic. For now, let winners run and do less. x.comÂ
The 3x leveraged semiconductor ETF is exposed to a chip-stock reversal because leveraged ETF decay worsens as volatility rises: the bigger the bubble gets on the way up, the faster capital is destroyed on the way down. Market makers have not marked up future chip volatility enough, making way-out-of-the-money 2028 puts highly likely to triple, though 5x-plus returns would require nailing the timing. Unleveraged semiconductor funds carry no such decay. x.com x.comÂ
US large-cap stocks look set for a weak October and a needed reset, as transports and now financials have broken down, often a week or more before the major indices. Midterm years have brought index drawdowns of about 10% in 2014 and 2018 and 14% in 2022, which would put the S&P 500's 7,000-7,200 area in focus. Even an Iran resolution would likely see its initial pop faded as liquidity rolls over in early October and hard by mid-October. With the VIX in the 14s, protection is cheap. x.com x.comÂ