If you have option positions, it's not just about direction, but volatility as increased volatility will increase or decrease the value of your options depending if you are on the right side of the trade or not.
It was just Monday that the VIX hit
5 year closing lows on a VERY complacent market, also recall that it would be hard to drive the market higher on a short squeeze as the QQQ was seeing the lowest level of short interest since I believe 1998 and the SPY I believe 2006.
Extreme's in volatility and sentiment are often turning points in the market. I have mentioned how over the last few days we have seen some very strong intraday leading positive divergences in the short term VIX Futures (VXX / UVXY), well take a look at both and also the daily VIX 3C chart.
1 min leading after a relative positive as is usually the case.
Same on a 2 min in both the leveraged and non-leveraged ETFs.
The 3 min with an initial leading that lifted prices and a new leading positive divergence.
The really impressive move is the 15 min chart, not just the overall trend, but specifically the leading positive of the last 2 days, it takes a lot to move a 15 min chart that much that fast.
VIX Daily, positive divergences in the past have lifted the VIX such as 2008, 2010, 2011 and now we have the largest divergence of the last 6 years, probably more with a huge leading positive in the VIX.
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