There are the same signals in index futures as the averages...
There are signs of VIX accumulation, however if you understood the gist of the SKEW post, The Black Swan Indicator Going Parabolic and the follow up post from last night, What Has Happened Since the F_O_M_C...
The implications are crafty, you really have to think like a criminal, but very shrewd. In essence, Smart money is able to make complacency and low volatility look like the dominant theme or the norm, meanwhile they are buying protection WAY BEYOND what is available via VIX as the SKEW is deep out of the money options, thus the "Black Swan" Indicator, allowing them to continue to monkey hammer VIX to sell or short in to higher prices as the market responds to the VIX smashing which is now even tapering off.
If smart money sees a major sell-off event coming, they can go beyond protection afforded by VIX to even further out of the money puts, basically expecting a massive move, this is the Wall Street I know who NEVER show you anything they don't want you to see. There seems to be further confirmation of that today with Credit Suisse's proprietary "Fear Gauge"which is defined at the bottom of this post, but it just hit 37 which is the highest fear reading EVER while the VIX remains near lows that haven't been seen in over 7 years.
I've been burnt too many times to enter VXX/UVXY without spectacularly good reason so while the volatility LONG trade is one I am VERY interested in and if timed right could pay off huge, I'm going to sit on my hands on that one until I feel certain, but I'm also retaining some dry powder just for that trade.
Credit Suisse's "Fear Barometer" explained...
EXPLANATION:
The CSFB is an indicator specifically designed to measure investor sentiment, and the number represented by the index prices zero-premium collars that expire in three months.
The collar is implemented by the selling of a three-month, 10 percent out-of-the-money SPX call option and using the proceeds to buy a three-month out-of-the-money SPX put option. The premium on both sides will be equal, resulting in a term commonly known as a zero cost collar.
The CSFB level represents how far out-of-the-money that SPX put option is, or in insurance terms it represents the deductible one would have to pay before the put kicks in.
So, for example, if the CSFB is at 20, then that means an investor would have to go 20% out of the money to be able to buy a put with the proceeds from selling a call that's only 10% out of the money. That means there is more demand for put protection - a sign of fear in the marketplace.
The index would rise when there is excess investor demand for portfolio insurance or lack of demand for call options.
It differs from the Chicago Board Options Exchange Volatility Index or VIX. The VIX, calculated from S&P 500 option prices, measures the market's expectation of future volatility over the next 30-day period and often moves inversely to the S&P benchmark.
The VIX is a fear gauge by interpretation, not by definition. It was designed to quantify the expectations for market volatility -- a property that is associated with, but not always correlated to fear."
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