Bearish VIX Bets Surge To 2010 Highs
One of the more notable 2010 "highs" achieved recently (and in a year when pretty much every metric is trading at or near all time highs, thanks to the Fed becoming the primary market maker in virtually everything), is the surge in Net non-commercial speculative positions in the VIX futures, which also confirms the latest bandwagon trade du jour. At -17,181, the net outstanding bets are at the most bearish for 2010, surpassing the previous record from August 17. However, while then the market was plunging, and the bet was a contrarian one, now it is one of momentum chasing, as pretty much everyone expects stocks to continue going higher, leading the VIX to plunge to fresh lows. So far it is working. Of course, as it the problem with every bandwagon trade, the second someone blinks and the direction in stocks is interrupted (and it will unless stocks continue rising every day from now until the last POMO officially takes America into a Fed-facilitated, ponzi-driven hyperinflation), the unwind will be vicious, as these are levered bets on what is basically a second derivative on stocks, which in turn are a first derivative on stocks. Anyone who wants to bypass all the daily noise and put a big bet either way, should just go the 4th or 5th level of leverage, and merely bet on whether this trend in record VIX bearishness continues, or, if it will stall. And since everything is now predicated on the moves in the dollar, and thus the EURUSD, the only question is how long will Europe tolerate incursions by the dollar in the 1.40+ space, which results in big losses to Germany's export sector, and thus, a very angry Angela Merkel.
Chart below per the CFTC's Commitment of Traders report.