Implied volatility came screaming off as the stock market rallied on Tuesday. The catalyst was a warm and fuzzy feeling flowing from China after the central bank slashed interest rates in an effort to help stem the tide of selling.
The pressure in the equity markets has taken a breather as the Chinese indices stopped their plummet for the moment, sending some mixed signals through the commodity world. One would assume that an across-the-board correction would be in the offing, but we haven’t seen that response as of yet in the energy and agriculture markets.
On Friday, the VIX closed the bullish window dating from early-December, paving the way for new gains in the S&P Index. Elimination of support in the VIX at 12.08 leaves some accounts over-hedged for the prospect for a back up in the S&P 500. This should lead to some more aggressive equity buying today and later this week.