So I spent the evening and early part of this morning watching different networks while watching the financial markets at the same time. The chart below is a 5-minute chart showing the S&P 500 and VIX futures trading during the non-US hours trading session. Then after 3 hours of sleep I taught my class at Loyola, spending half of that talking my students down from their disappointment at the election results. There were a couple of things that stand out on the chart from last night. First the picture and then I’ll summarize below.
The first thing is not highlighted on the chart, but is very visible. Every piece of news that came out seemed to favor Donald Trump and for a few hours every new piece of information resulted in a new high in VIX futures and new lows in the S&P 500 futures. About 9:15 Chicago time I sent my 12-year old to bed. She asked me who I thought was going to win, I told her we still didn’t know. Being the bright child that she is, she then asked what VIX was doing. When I responded to her by saying it was up over 30% she responded with, “Sounds like Trump is going to win”.
The second thing worth highlighting is a bit subtler. Late in the evening S&P 500 futures were limit down. The flat price action below the purple arrow above shows this. VIX futures were still trading and did not make a new high when we hit the S&P limit. When the S&P futures commenced trading again note that VIX futures were dropping as the S&P futures were climbing. VIX is called ‘the fear’ index for a reason, and it did a pretty good job last night signaling when fear had peaked.