.The S&P 500 ripped 135 points today. The VIX dropped 20% right along with it.
The November volatility futures contract never got the message. It still sits a full point above spot VIX with only 14 days left to live.
That gap tells me the market is very much on guard.
The headline rally looks enormous. The Dow jumped 1,700 points, a gain of more than 3%.
The NASDAQ only managed about 1%. The QQQ sits massively unchanged on the week.
Traders are rotating into anything that isn’t innovative. Financials broke out 3%, and home builders jumped 5.5%.
Consumer staples like Walmart caught a bid. Health care and gold climbed too.
Apple rallied 6% today. Its market cap now stands at $5.15 trillion, ahead of Nvidia at $4.9 trillion.
Amazon sat basically unchanged on the year four days ago. It’s now up 18%.
Semiconductors went the other way. The SMH fell about 3%, and Micron dropped 7%.
AMD traded as high as 530 after strong earnings yesterday. It now sits at 480 and change.
That bothers me. I call it a desperation rotation, and rotations this violent don’t last.
I’m watching the volatility futures instead of the VIX chart. Here’s what I broke down in tonight’s video:
- The November VIX futures contract sits at 17.60 while December sits at 17.90. That 30 cent spread marks a very mild contango.
- November still trades a full point above spot VIX with 14 days until it settles. If risk had truly abated, that contract would have crushed down toward spot VIX.
- The SPX priced a $168 expected move this week. Today’s rally pushed it just shy of the upper edge, with about $72 of expected move left for the rest of the week.
- The NASDAQ still hasn’t reclaimed 29,000 on the 180 day four hour chart. Below that level, I assume heavy volatility stays in play.
The semiconductors need to come back. Without them, I expect more turbulence in volatility.
