Inventories reach new heights while VIX drops to a new low

I have to sit and smile every time I think of the big names in the financial sector who offer solutions. Today is one of those days that makes me smile because it is today the day of the "quadruple tornado".

The day of crazy quadruples may seem mysterious and disturbing, but it is really commonplace for most individual investors. A quad day is a day in which four types of badets – stock index futures, stock index options, stock options, and individual stock futures – expire simultaneously. This phenomenon occurs four times a year on the third Friday of March, June, September and December.

As an individual investor, you may be in a transaction likely to be affected by one of these expiration dates – most likely a purchase option transaction. Of course – but you're probably not going to be affected significantly by the quadruple badumption. Portfolio and Fund Managers, on the other hand, need to pay more attention to Quadruple Hurricane Day because they will likely have several positions that will need to be addressed to keep their portfolios and funds running smoothly. . This rebalancing of portfolios and funds generally results in a large volume increase on the day of the fictitious four-day day as managers liquidate their old positions and enter new ones.

In the past, the peak volume was badociated with a peak of volatility. But the more sophisticated and connected financial managers and exchanges are, the easier it is to plan and execute important, non-disruptive transactions just before the closing bell on the fictional quad day – which marks the beginning of most important transactions, as you can see on the five-minute chart of the S & P 500 index below.

At the end of the day, the day of the Quadruple War of Witches is certainly remarkable because of everything that happens in the financial markets, but you should not be afraid of such a day. This will not affect the fundamentals of the transactions in which you are located or the portfolio you have built.

We have been waiting a month now to see if the S & P 500 will gather enough strength to break the resistance at 2,816.64 – the highest established on October 17, 2018 – and the day has finally arrived. The S & P 500 closed at 2,822.48 today, after hitting a new one – day high for 2019 at 2,830.73.

This decision is in no way a guarantee that the index will defy its record of 2 September 2014, the highest of 2 940.91 September 21, 2018, but it certainly opens the way for investors trying to push the S & P 500 index up. At a minimum, this places the next resistance level at 2,872.87 – the highest of the index reached on January 26, 2018, which then served as support while the S & P 500 consolidated. from the end of August to the beginning of October of the same year – at your fingertips.

In addition, since the S & P 500 fell so rapidly in the range of 2,872.87 to 2,816.94 when it was lowered on October 10, 2018, the chart did not have the opportunity define a level of support that can serve as potential levels of resistance on the way home.

Quadruple Witching Day is the perfect day to highlight the difference between volatility and implied volatility. Volatility is a measure of the magnitude of the movement the market is currently experiencing, namely an index or an individual badet, such as a stock or an exchange traded fund (ETF). For example, if a stock or index bounces rapidly in a wide range, its volatility is high. Conversely, if a stock or index bounces slowly in a narrow range, its volatility is low.

Implied volatility, on the other hand, is a measure of the expected volatility of the market, an index or an individual badet. For example, if investors believe that a stock or index will make a big move in the future, its implied volatility is high. Conversely, if investors think that a stock or index will not make a big step in the future, its implied volatility is low.

The CBOE Volatility Index (VIX) is an implied volatility index. It gauges how worried investors are that the S & P 500 is going to take a big step forward, generally down. When the VIX climbs to higher levels, as was the case at the end of December 2018, this indicates that investors are concerned that the S & P 500 will move much lower in the future. When the VIX drops to lower levels, this indicates that investors are comfortable with the stability of the S & P 500 and are not preparing for a dramatic fall.

That is why today was so exciting for the bulls on Wall Street. For the first time since October 4, 2018, the VIX fell and closed under 13 years. The last time the VIX dropped to these levels – from May to September 2018 – the S & P 500 has seen a steady rise to new historic highs.

Just seeing the VIX go down below 13 does not guarantee that the actions will continue to increase. This puts the odds in our favor that investors are optimistic, but this should never be interpreted as a guarantee. However, when it is badociated with resistance, the S & P 500 manufactured today is an extremely encouraging sign.

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