Looking to the Futures
The Thin Line Between Fearless and Foolish
Betting on calm times ahead has become a popular trade again. According to the Traders in Financial Futures report by the CFTC, large speculators have accrued a net short position of 92,786 contracts as of Aug. 19th. This is the largest net short position since September of 2022. At that time the VIX sat in the 30s for the better part of a month. This data does not include positions in exchange-traded products or other funds or traders who hold both long and short positions.
The last notable buildup of short positions to 69,000 contracts was in February, right before tariff plans were announced and fears about global trade and the global economy caught hold. The VIX worked its way from under 20 to over 50 in the ensuing months.
The accumulation of short positions prior to that was last summer that reached a net short position of 62K contracts. Again, this was right before the yen carry trade blew up spectacularly. The VIX skyrocketed from around 13 to an intraday level not seen since the pandemic.
The one-year average price for the VIX index is just over 19, putting the current level roughly 22% below that.
The implied volatility of volatility (VVIX) is currently near the lower end of its 52-week range at 91which also confirms the market’s easy sentiment.
CNN’s Fear & Greed Index closed just above Neutral into Greed territory yesterday. It has been over a month since it tipped into Extreme Greed and only a week since dipping into Neutral.
Technicals
The VIX futures (/VX) have been dropping relentlessly since peaking in April with only a couple retracements back up. Each contract month has fallen as the active month except for June that managed to oscillate and holds its value.
The support at 17 that had held several times this year broke last month. If it breaks again this month, the next level of support is at 15.45 – the previous low. To break this downtrend, the VIX futures will need to break through resistance at the 19 level.
Contract Specifications
Major economic reports, trading events, and news items that could potentially impact specific futures markets:
Initial & Continuing Claims 8:30 AM ET
EIA Natural Gas Inventories 10:30 AM ET
GDP – Second Estimate 8:30 AM ET
Pending Home Sales 10:00 AM ET
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