{"id":19918,"date":"2022-07-18T07:30:11","date_gmt":"2022-07-18T11:30:11","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19918"},"modified":"2022-07-18T07:30:11","modified_gmt":"2022-07-18T11:30:11","slug":"our-reliable-crystal-ball-is-giving-us-another-vision","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/our-reliable-crystal-ball-is-giving-us-another-vision\/","title":{"rendered":"Our Reliable \u201cCrystal Ball\u201d Is Giving Us Another Vision"},"content":{"rendered":"

Our crystal ball was right last week.<\/p>\n

And it’s offering another vision for traders this week.<\/p>\n

When we peered into the stock market’s “crystal ball” last Monday<\/a>, we noticed the Volatility Index (VIX) calls were trading at a large premium to the price of VIX puts.<\/p>\n

This is a warning sign that the VIX is headed higher. And a rising VIX usually goes along with a falling stock market.<\/p>\n

Sure enough, the VIX rallied from 24.64 on Monday to more than 28 on Thursday. The S&P 500 dropped as much as 170 points during that time frame.<\/p>\n

But by Thursday morning, traders who paid attention would’ve notice the VIX calls were trading for roughly the same price as the VIX put options.<\/p>\n

The crystal ball was neutral. There was no edge to either side.<\/p>\n

By mid-day on Thursday, the stock market started to recover and bounced through the end of Friday.<\/p>\n

While stocks were rallying, the VIX was falling. And by the close of trading on Friday, the crystal ball was sending another signal…<\/p>\n

The VIX traded near 24 on Friday.<\/p>\n

At the time, the VIX July 20 $24 call options were trading for $1.60. Meanwhile, the VIX July 20 $24 puts closed were trading for $0.40.<\/p>\n

In other words, traders were willing to pay four times as much for a VIX call option than for an equivalent VIX put option.<\/p>\n

This tells us traders who are making bets on the VIX expect the index to move higher over the next few days.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

If we go out a little further and compare the VIX July 27 $24 calls to the VIX July $24 puts, the price discrepancy is even more severe.<\/p>\n

The calls closed Friday offered at $2.80, while the puts were only $0.45. (I use my trading quote system to track these prices, but you can find them at FreeRealTime.com<\/a>.)<\/p>\n

VIX calls are far more expensive than the equivalent VIX put options.<\/p>\n

So, VIX option traders clearly expect the index to move sharply higher between now and the end of July. And a rising VIX (rising volatility) usually accompanies a falling stock market.<\/p>\n

That’s how it worked last week and we’re probably in for similar action this week too.<\/p>\n

Best regards and good trading,<\/p>\n\n\n
\"signature\"<\/td>\n<\/tr>\n<\/table>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/strong><\/h2>\n

In today\u2019s mailbag, Jeff Clark Trader<\/em> member Don shares his thoughts on the future of the market…<\/p>\n

\n

I thought the major indexes might go back and at least test their all-time highs to around 15,000 on the NASDAQ 100 index. But every attempt keeps falling far short. So, I\u2019m thinking we may be in a continued sideways pattern until at least the November election.<\/p>\n

– Don K.<\/strong><\/p>\n<\/blockquote>\n

Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

This is a warning sign that the VIX is headed higher\u2026<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-19918","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19918","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19918"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19918\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19918"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19918"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19918"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19918"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19918"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19918"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19918"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}