Danger Will Robinson!
I’m watching the price action in equities and although I’m not hugely surprised about the continued short squeeze I’m seeing clear and present signs of caution preventing me to participate in anything but very nimble short term trades (see this morning’s entry on the spoos for instance – that was nice!!). Let’s take it from the top:
This is the chart that got me to dig a bit deeper: Despite equities on a proverbial rampage I’m seeing a rather distinct spike in volatility. Could it be that market makers are getting a bit nervous up here?
The SPX:VIX ratio visualizes the divergence rather nicely – usually the two move more or less in tandem. Today however the ratio is heading in the exact opposite direction. This divergence started a around 11:00am EDT and accelerated from there.
But wait there is more – here comes the really interesting stuff. Please step into my trading lair:
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UPDATE 2:26pm EDT: Extremely strange gyrations on the VIX today:
As the market started to drop the VIX dropped along with it. Super odd and I suggest extreme caution up here.