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There are actually 3 certainties in life: Death, taxes & VIX mean reversion - Morning Market Squeeze

> As risky areas of the market like IWM, HYG and EURJPY are now testing first big support, some reflexive strength is favored ST. LT, however, deterioration is widespread across the risk complex, so any rallies should be ...


> After crude's sell-off accelerated to a 3-sigma decline projected lower from the 08/26 pivot high, and reached its initial target near 35.90 on Tuesday, some profit taking on bearish positions is in order. Pending a close > ..., however, downside risk will ...


> We've added ..., ... &... shorts, and a ... long to the trade ideas list. More importantly, we'll be using any short-term risk rebound to enter shorts in ..., ...and ... in the coming days.


Some Quick Thoughts:


Actually, there are 3 certainties in life: death, taxes and the fact that the VIX mean reverts. One of the more reliable tactical observations is that sharp increases in the VIX following a break above the widely followed 50-day EMA often show some degree of hesitation/mean reversion upon extending to 2x the 21-day ATR above the 50-day EMA.


We looked at all detrended occurrence that match the most recent instance (see study

parameters at the top of page 8) , which occurred on Thursday and found that, on

average, volatility usually ..., before it starts to expand again in week .... This is interesting because it matches our current view that ...


Marking the largest 3-day decline since early March, the swoon in big tech (i.e. the Nasdaq 100) continued on Tuesday. As a reminder, the recent drop follows the massive run to historic levels of call option buying in recent weeks. As the debate rages on about who was actually to blame for this run-up, recent evidence placing blame on Softbank appears to be pre-mature, as Softbank's call purchases were largely delta neutral. Regardless of who's to blame, the record call buying reeks of froth, and the froth is currently being worked off. The question now becomes whether the ...


As we wait for further evidence of how this phenomena plays out, the one thing that is certain is that a major breakdown in the cap-weighted S&P 500's prevailing uptrend has occurred. At the same time, though, we should reinforce the fact that tops rarely take the shape of inverted Vs, and usually develop as part of a process. Therefore, our favored scenario holds that the benchmark S&P 500 should find a ..., which will lead to a better selling opportunity upon any retest of the early September highs. For this morning's pre-market gains to turn into something that can eventually develop into a sizable retrace of the September swoon, however, settlement above ... is required.


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