Thanks, FOMC Meeting. Here We Go Again

Thanks to the FOMC meeting this week, S&P 500 started declining again. One interesting fact to point out is the VIX is not spiking and VIX9D is slowly but surely dropping, even though the VIX/VIX9D ratio is still very high.

VIX Related Indices

VIX9D was elevated going into the FOMC meeting on Wednesday. It is still elevated compared to VIX, indicating the market is still nervous and hedging against something in the short term.

VVIX is coming back down to a very low level again. It indicates the market is not utilizing VIX options itself to hedge. In other words, VIX options are relatively cheap right now compared to a few weeks ago.

In case you are interested, here is more information about why it’s a good idea to monitor these VIX indices.

The automated VIX table for these calculations is available here.

S&P 500 Technical Analysis

Friday’s market movement filled a small gap formed on Thursday, so now there are no gaps below but we still have two large gaps remaining on the top (2 red arrows).

After the FOMC meeting on Wednesday, there is a slim chance we will see those two gaps getting filled this year.

My Personal Thinking

Based on the way the market reacts to each FOMC this year, there is a very good chance that the market will continue to decline and climb back gain right before the next FOMC meeting which happens in December.

VIX seems to suggest everything is going to be fine in the mid-term as it has been steadily declining and did not jump up much even with a large drop that occurred on Wednesday.

However, VIX9D is still high for some reason. Even though we are no longer in backwardation, this phenomenon seems strange to me.

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Tony

I have been trading options since 2010 and have been testing and experimenting with various trading styles. Fundamental Analysis based, Technical Analysis based, Trend Following, Day Trading, Swing Trading, etc.

My primary option trading strategies incorporate volatility and I am constantly experimenting with various trading strategies to improve my PNL.

I hold two Master’s degrees (MSc and MBA) with career experience as a cancer research scientist and a digital marketer.