In today’s market we saw a major bearish divergence in the
correlation between SPY and VIX futures (and VIX) with the SPY closing up 0.6%
and January VIX futures up 2.34% (as reflected by the move in VXX). This reflects a strong bid for put protection
in January options as I discussed would happen last week. In fact, over the past three days both the
spot VIX and January VIX are up over 8% while the SPY is up nearly 1%. What
this is telling us is that a pullback in SPY down to near support at 142 in the
near future is very possible. Surely you bought some protection after I suggested in my previous post?
