Monthly RVX and RUT

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From all that I see and from my prior experience, I believe we’re in a topping/consolidation pattern. Sell in May and go away rings in my ears everyday. Increasing volatility seems in the cards.

Was it not a most spectacular trade– from $1920 to $21 USD— over the past 5 years?

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The graph has no language to express fully the size of the move.

Can this explain why spread traders have achieved very handsome income for their risk?

The biggest differences between now and 2008 are both price and volume. Price continues to erode but at a lower volatility itself; meanwhile, volume skyrockets. Such a reversal of conditions, if not reversal of trends, gives me pause.  What is going on here?

I kept my eye on the following chart yesterday:

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Effective Volume

Weather report: Yesterday was mild. If the powers-that-be decide to run up the equity indexes, burning shorts may speed their end. However, heavy selling pressure could cause the 10 and 20 day moving averages to bend, the bars could get longer, and we could roll over further. This is difficult to judge because during the past several months this level of volatility invited buying. If the volatility indexes spike again, big moves are expected and option premium will be rich. Whether we sell Iron Condors, buy Butterflies, or buy options in a VIX-related product, we have an edge though fast moves make snatching profits more difficult.

As always, stay tuned to the market. Don’t miss the big move.

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