When the SPX rallies and the VIX rallies at the same time it is almost always negative for the S&P 500. ?Take a look at how SPY vols has been moving and SPY has moved over the last few weeks.
LivevolX (r)?www.livevol.com
Yesterday might have only been the beginning of the sell off. ?It appears the VIX is going to rally all the way through next week and is probably already pricing in the fear from non-farm payrolls next week. ?Traders have seen what a miss in ISM can do, ?traders likely would rather not hold the SPX, at record highs, ?with non-farms in front of them. ?My guess is that the weekly straddle going into non-farms next week will need to price close to 20 points in it.
The Trade:
The SPX is going to likely be easing lower for the next few days, ?VIX is probalby going to be creeping higher until the market feels its completely priced in the potential for SPX to move a full 1% or so.
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