Bears got downright giddy today, as for an hour the most famous 50 day moving average in years seemed to finally be predictive of a price direction lower. But in the end, it was a non-event. S&P ended basically flat, the indicative value of the VXX was down 6 cents, and the VIX up 7 bps.

Everyone is still predicting that the 50 day is going to reject the S&P to some sort of target, fib level, or new channel, but it is not yet obliging. Resilient is an appropriate description for this market. While the S&P has been channeling the 1600-1620 range for the past week, don’t look now but a bullish MACD cross is about to occur:

S&P volatility has remained quietly under 17 for 4 days now, but the VIX futures are still expecting higher vol. In fact the open interest in the SPY options is 2-1 puts to calls:

Why are the futures trading this high above spot VIX with 8.5 trading days to expiration? I would have thought that they would have fallen closer to spot by now, with all the time decay in the offing, although there’s that job number out there on Friday. Could there be another volatility exhale after that number satisfies the market by being good, but not too good?

Who knows, but one thing is certain. Until the market sells off and the VIX rises, the VXX will have a tough road to hoe. I am still long a few $18 July puts, almost just to see how this decay/jobs number/50 day resolves itself. If for some reason, Friday goes well and the market breaks the 50 on it’s fourth attempt, these puts could double. If it doesn’t, then they will still have some value and I will look to exit near my cost. It is an asymmetric risk/reward at .14. Keep in mind that these puts have 3 days more life than the VIX futures.

But that is a minor position after we closed all our $19 puts for a 100% return. Other trades tweeted out this week include:

Short GLD weekly call spread, 122.5-124.5. Sold for .40, now .27

Short SPY weekly call spread, 163.5-165. Sold for .44, now .10

Sold VXX weekly call spread, 22-24. Sold for .52, now .05.

Sold VXX July 12th call spread, 20.5-22.5 for .40, now .44

Long UCO July puts for 1.05, now 1.15. Oil could fall dramatically with equity selling or Egypt resolution. It is at the high of the year on bearish fundamentals.

It has been a great week, all trades are working. This is a great environment to sell volatility. I do not anticipate any trading tomorrow if the open is not a significant gap.

Follow trades @VolatilityWiz on twitter and have an awesome holiday. We may post Friday should there be some job-related drama.

As the S&P rose 20 points and failed at the most famous 50 day moving average in recent times, the VXX continued its inevitable move lower. The VIX touched 16 at its low of the day, and moved slightly higher as the market gave back half of its early day gains. That was the second test of the 50 day from below, and the more it happens, the likelier it is to break through to the upside.

There is a significant amount of bearishness out there, as the NAAIM data recently demonstrated. 75% of active managers have backed away from equities. And the most recent survey corresponds with the lows of last June:

http://www.naaim.org/news/naaim-survey-of-manager-sentiment/

Most pundits are claiming that volatility is here to stay for what will be a choppy summer. This may be true, but I would probably be inclined to sell vol whenever the VIX is above the 19-20 level. As there have been enormous fund withdrawals in the bond space, consider where that cash is most inclined to go. Could there be a consistent bid for stocks this summer and it will be much less volatile than predicted? I’m just considering a contrarian viewpoint to the legions of folks expecting the 50 day and bearish crosses to cause a big retracement and higher volatility for the remainder of the summer.

The futures are still maintaining a significant spread to the VIX and time is quickly running out on the July contract. There are only 9.5 trading days left for the July VIX futures:

The VXX will be nearly 50% of each contract, probably by tomorrow’s close. I do not know exactly how they handle the roll for holidays, but it doesn’t Payday Loans really matter. The August cycle can be incredibly quiet, as we witnessed last year with the VIX falling into the 13’s during August. So the spread of approximately 13% of spot VIX to August will be a headwind to VXX in a short period of time.

I closed all of my VXX July $19 puts today for a 100% return. I still hold the $18’s for .14 and I will be a tad more patient with them as the VXX can certainly fall to nearly 19 in the short-term. Yet, I reduced the vast majority of the long put risk, as the 18’s fulfilled our expectations and a sell-off could destroy their value.

Other trades executed today:

Sold July 5th SPY call spread at 163.5-165 for .34. It has already fallen to .17. If the market moves higher tomorrow, I will be looking to sell next week, as the decay in those options should occur rather early relative to it’s typical Thursday afternoon vol decay, on anticipation of the weekend.

Sold a July 5th GLD 122.5-124.5 spread for .46. It is virtually unchanged. If GLD moves higher from here, I may roll it up. GLD volatility was over 30 and fell 10% today:

I would rather sell call spreads than put spreads, simply due to market behavior. The market drifts higher and plummets lower, so the odds of getting caught holding a bad spread are higher on the put side.

Consider this idea, one that I’ve been pondering for some time. The times most market participants are on vacation, seems to be the easiest time to execute profitable trades in the marketplace. The winter holidays are a classic example, and this week is another one. I look forward to the holiday weeks. If you don’t know what time-tested advantage you have during the certain annual events, I recommend you pick up the Stock Traders Almanac.

Follow VolatilityWiz on twitter, as I post these trades shortly after they occur.