The S&P 500 just ripped 2.4% to the upside. Everyone’s celebrating. The VVIX says they shouldn’t be.
The VVIX is the volatility of the VIX itself. It measures what professional traders are actually doing with their hedges. On a day where the market exploded higher, the VVIX only dropped 5%.
That tells you something critical. The professional world is not giving up their protection.
VIX options traded nearly 1.6 million contracts today. That is enormous volume for a day where the market supposedly just resolved its problems.
And here’s what most people are missing about this rally. We went from unchanged on the week to the upper edge of the weekly expected move. The $167 expected move landed almost to the penny. There is nothing unprecedented about where we are right now.
The real story is underneath the surface. I faded the financials today with a bearish position in XLF after we cracked through the expected move. Earnings kick off next week, and if this market fades from here, financials get hit hardest.
Tech told the real story today. In tonight’s video, I walk through the specific names flashing warning signs and the ones still showing strength:
- Tesla traded on massive volume and nearly cracked through its recent lows, closing at the lower edge of its expected move.
- Microsoft bounced early, hit the upper edge of its expected move, then faded all the way back to unchanged.
- Apple bounced but well underperformed both the S&P 500 and the NASDAQ throughout the session.
- Google jumped back to near its most recent highs with a strong bid underneath it.
- Broadcom put in a full two standard deviation move to the upside on news from yesterday.
Without Tesla, Microsoft, and Apple carrying weight, this market has a problem. Meta can fly 6.5%. Broadcom can rip. Google can bid. It does not matter if the heavyweights are broken.
The VIX is still sitting at 21. The vol futures have flattened but not normalized. I expect considerably more than the $84 of expected movement priced in for the rest of this week.
Before any geopolitical risk entered the picture, tech was already in trouble. This rally has not fixed that.
