Chart Watching for Relationships

On my live screen I always have the following charts up: UVXY, /ES, VIX, /VX M1, and /VX M2. This gives me a complete picture as to the inputs for my trading. I’ll often include /CL and /ZN as checks on /ES movement to see if it’s a macro event or just a selected equity event behind a sharper SPX move.

What you’ll learn from this focus is how tightly and instantaneously these markets move. UVXY traders don’t get to watch SPX move and THEN decide whether or not prices should increase or decrease. The changes happen faster than you could react to.

One thing I have noticed (haven’t determined if this is a quote refresh rate issue or not, but it’s a frequent event) is that UVXY (and /VX) can foretell a directional move in SPX. When I say foretell, I’m talking about a few seconds, nothing that a manual trader could exploit. What I think is happening is that /VX traders are watching bid/ask imbalances for SPX and front-running them there since they couldn’t do that directly with the index (they’d just be adding to the imbalance)

Another suggestion I make to technical analysis proponents is to overlay UVXY.IV over UVXY to see if there is any daylight between the traded symbol, and the never traded, pure calculated symbol. Should only take someone a day or two to realize that UVXY does not ‘free-float’ based on the factors that influence equity and commodity prices (e.g. supply and demand). Similarly you can overlay /VX and UVXY and see the exact same thing. I highly recommend this to complete your understanding.

Lastly for the T/A hold outs, I ask them to overlay all of the /VX based symbols (VXX, UVXY, SVXY, etc.) and see if prices diverge. All of these symbols are pure calculations based on the same (or very similar benchmarks)

Try out some of these chart watching suggestions and see if you notice something different?