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The Easy VIX:  Slightly Surprising VIX Metrics Today; Still Bullish But Wary

|About: SPDR S&P 500 Trust ETF (SPY), DIA, QQQ, IWM, SSO, Includes: IEF, VIXY
Summary

I've been increasingly happy with the VIX metrics over the last couple of weeks, but today - not so much.

The Primary Slope unexpectedly turned negative, but remains above the trigger level; The Confirming Slope is now positive but not enough to be bullish.

It's not unheard of that the VIX term structure would move less contango when the S&P rises (only .03% today), but the move might be telling us something.

So, a slight margin above the trigger for the Primary Slope and a SHAPE metric which is in the safe zone stands against the next 'sell' call.

A week ago I would have thought the rally had a few weeks to play out; now I'm not sure.  No big deal; I'm not selling until the metrics turn.

I was planning to write a blog tonight, but I thought it would be a completely benign report about how solid all the metrics looked.  They've been improving steadily for two weeks.  It turned out to be a little different.

Here is the progression of VIX futures curves from the tail end of the last sell interval (August 27th) to yesterday (9/17), and then tonight (9/18). (I'll begin using 'VIX term structure' and VIX futures curve interchangeably):

VIX Term Structures

   Source: Michael Gettings      Data Sources: VIXCentral.com, CBOE

That move upward on the 18th is a bit of an anomaly in a slightly rising S&P market; the S&P was up only .03% today.  Here is the Easy VIX Dashboard.  I've plotted the appropriate number of days for each slope this time.

Easy VIX Dashboard

Source: Michael Gettings    Data Sources: Fidelity, VIXCentral.com, CBOE

Look at the 20-day plot of SHAPE metrics and you can see how bullish the trend was until tonight's data point.  As I expected in last week's blog, the Confirming Slope has turned positive; however, it is still below the algorithm's trigger level.

What does it all mean?  It could be that given the market's undecided behavior today, VIX traders are simply injecting a small dose of caution in the bullish mix, or possibly the change represents the start of a psychology reversal. Either way, the metrics will tell a story in coming days.

Housekeeping

I've submitted a proposal to start a Marketplace service with Seeking Alpha.  I hope to hear back this week, and I'll keep you informed.

In the meantime, thanks for seeking out these blogs and thanks for following.

Disclosure: I am/we are long SPY.

Additional disclosure: I trade all the tickers mentioned using the algorithm described. The artificial intelligence algorithm monitors daily
performance and periodically recalibrates look-back horizons and triggers in a step-wise sequence. New calibrations are applied prospectively only, and never applied to the historical period from which they derived. The algorithm described and the discussions herein are intended to provide a perspective on the probability of outcomes based on historical performance. Neither modeled performance nor past performance are any guarantee of future results.