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The Last 3 Times This Happened, Stocks Rolled Over

Before the world morphed into what it has become, the relationship between stock prices and intraday ranges was somewhat positively correlated (as one would imagine) - higher prices and a steady vol means absolute ranges will trend higher. However, the last few years - and most especially the last few months - as equity index prices soared, so intraday ranges collapsed. In fact, the last 3 times a new low range was made, that marked a local high in stock prices. Along with the fact that the VIX term structure is the steepest since the pre-Bullard collapse,  hedging - as opposed to BTFTAH - seems more appropriate in the short-term at least.

 

The "new" normal - plunging intraday ranges as stocks soar...

The last 3 times (red ovals) range collapsed and rolled over marked short-term tops in stocks.

 

The "old" normal... not that

 

And front-end VIX has collapsed compared to mid-term - the steepest VIX curve since the pre-Bullard-save plunge...

 

Trade accordingly...

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Charts: Bloomberg

h/t AY