VIX Update

All of last week we knew there was one thing controlling the market and that was the $USD/JPY vs ES the correlation, wherever USD/JPY went, ES (SPX E-mini) futures followed. There were two times I recall when ES either dropped below the correlation with the carry trade pair or went above it and both were very short lived as the algos pulled ES right back to USD/JPY, but we also knew from Yen 3C charts and $USD 3C charts that the psychological level of $102 was going to be hit just like AAPL spiked in volume on a 1 min bar right at the high of a 1 min. bar of $600, or NFLX took out $300 exactly, these are psychological magnets where stop orders and orders are placed, so as we knew all of last week, it was just a matter of time before ES moved up as USD/JPY took out $102 which was a magnet.

I don't know how many USD/JPY or Yen/$USD updates were posted last week, but lets just say the Looking Ahead post Friday afternoon started like this:

"There's definitely some positive activity today on intraday timeframes which leads me to believe we'll probably see some positive activity early next week...my gut instinct would say early positive price action Monday....Since USD/JPY has been and as far as I can tell, continues to be the only real trigger out there as $102 $.22 away and acting as a huge psychological magnet, that can move the market, the signals there continue to be some of the most important for the moment, whether "considering" a long trade or getting a great opportunity at setting up shorts or add-to positions....(as mentioned before)...The only areas ES breaks with the FX pair are resolved quickly with either accumulation on a short term basis or distribution on the same (yesterday saw distribution)...The VIX Futures continue to migrate out to a stronger divegrence as we had a 5 min and today added a 15 min and by the close it looks like a 30 min positive has been added...."

"Otherwise, any price strength is more or less a gift to sell short in to assuming we can get it which I think is probable being USD/JPY $102 is so close by. However there's no reason I can think of that the pair need do anymore than cross $102 and trigger orders, I see no reason that it need run higher or linger, in effect it would be setting a bull trap. It might look something like this...

From a traders point of view, the support VIX (spot) found last week that looked like this...

Last week's spot VIX and yesterday's close... VIX would not be needed by retail traders when the market rips higher as we expected as seen by the linked and quoted post from Friday above as ES/market follows the signals in USD/JPY that were telling us all week that USD/JPY would break above $102 and drag the market with it.

However (and that's how this post got started, as an answer to a member's question), why then would we keep seeing VIX futures accumulated on the cheap if volatility is not expected to move higher (the market lower).

For instance, VIX futures continue to post positive divergences at EVERY move lower, , but as I said last week, "If you knew something the crowd didn't, then VIX futures on the cheap would be a gift", so the plot thickens a bit when we are posting VIX futures with signals like this...

 VIX futures 1 min 3C chart yesterday, what happened on the open? USD/JPY broke $102 and took the market with it.

The 5 min VIX futures aren't showing in line at best as they normally would, but continued leading positive divergences, look at the volume toward the end of the day.

And 15 min VIX futures which are rarely spotted with divergences out this far, continue to lead as do 30 min VIX futures as well as VXX and UVXY.

The same is being seen in Short Term VIX Futures.

 Intraday divergences keep piling up and accruing on longer charts.

Like the trend of this 5 min chart, compare to the last VIX spike and where 3C was.

I didn't and wouldn't put a VIX or UVXY long call out there ...yet, but as we looked at the $USDX single currency futures Friday, they were exactly the opposite of last week when they were all positive and leading $USD/JPY higher, yesterday they flipped and are almost all negative as they see distribution which tells me someone in the know sees the $USD/JPY losing $102 and the market or ES with it, then in that situation, buying VIX futures on the cheap starts to make a whole lot of sense, thus the signals.