VWSI at Zero Even though VIX Jumps 16.6%
It is very unusual to see the VIX make a significant move and the VWSI to register a zero reading, particularly given the mean-reverting bias built in to the VWSI calculations. As a result, last weeks 16.6% jump in the VIX has me suspecting that the VIX may be a better barometer of market volatility in the coming week or two.
Officially, the VIX ended the week at 28.01, up 3.99 or 16.6%. While the VIX has been mostly going sideways the past three weeks, the current level is still 66% higher than the 18.47 close just seven weeks ago.
Normally, when I see the VIX jump 15% or more in one week, I start to think about selling some VIX options. With the VWSI at zero, however, there doesn’t seem to be a tradeable edge in the current situation. Furthermore, a quick glance at the VIX COT report chart shows the commercials continuing to add to long positions even as the VIX trends higher (the orange line is the ‘net commercials’ and dark line is the ‘net large traders’) – a very unusual posture for a group that generally prefers to fade the big moves. Perhaps something wicked this way comes…
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