VIX SPIKE ON AN UP DAY

I've talked in past about divergences in the VIX and the market. Usually the VIX and the market move in opposite directions. When they start to move in the same direction, we need to pay attention. When the VIX rises, it usually signals an increase of fear in the marketplace...fear of a drop or sell off. This move up in the VIX usually coincides with a move down in the market. When the market moves up and the VIX moves up, it is a warning signal to distrust the rally. It doesn't mean that a drop has to take place, but it is a warning sign that there could be further selling to come. Everyone is looking at the Greece crisis and wondering how it will play out (I told you eight months ago that this problem wasn't going away). If it gets worse, it is easy to see how the market could drop further. However, if Greece gets bailed out, you can see how the market could rally very quickly as the shorts scramble to cover their positions. We have June option expiration tomorrow. In fact it is a "triple witching" expiration (stock options, index options, and futures options all expire on the same day). These days are often very volatile and almost impossible to predict. This is why I'm not going to try to predict a direction. I've often said that any expiration Friday is a good day to go golfing. Triple witching is a good day to go on a cruise. I'm still looking at the 1250 area on the S&P 500 as support. The spike today in the VIX shows that the professionals are worried that the 1250 area might not hold. Tomorrow is Friday and traders don't usually like being long going into the weekend. That said, they might not want to be short either. We did rally into the close for the first time in a long time, but I think that was mostly short covering going into the triple witching expiration tomorrow. I wouldn't recommend a new put position here, but I do think you should continue to hold your current put option positions if you have them.