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Skew Divergence Update.

  • Written by Syndicated Publisher 385 Comments385 Comments Comments
    September 27, 2011

    Once again we see divergence between the SPX and the implied volatility skew. In other words Monday’s rally did not quite pass the “smell test.” In fact in really stunk.

    IV Skew VS SPX

    Notice the divergence once again which does not support Monday’s rally. One data point is not enough to completely throw water on the “rally” but we have seen this before and it has resulted in the SPX correcting. Something to keep an eye on. Additionally with markets up so much the VIX at such elevated levels should have been down more than 5% on Monday.

    Skew Vix Divergence VS SPX

    Similar to the skew we have a divergence once again. Additionally the skew vix divergence put in a new low signaling its trend should continue lower further pressuring the SPX.

    Images: Flickr (licence attribution)

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