Compliments of Central Bank Dopium, HFT computers, and delta hedgers (aka. volatility sellers), the markets have now carved out what can only be described as the mother of all bearish rising wedges. This pattern which has developed since the low in 2009 is obvious to even a blind man, although likely not obvious at all to the recursive computer algorithms generating this attenuating fractal. Volume is duly collapsing (lower pane), per the text book definition of a rising wedge. We have been back and forth through this 1375-1400 level about 10 times since 2007, so mark this area, because it's where most of the bodies are likely to be buried - metaphorically speaking, of course...
As I have said before, selling options volatility into a multi-year top is analogous to selling fire insurance right before fire season - it works great, until it fails catastrophically i.e. it's just Wall Street's latest sky dive without a parachute. Clearly, as this article confirms, some people didn't nearly get the message from 2008. So, the market will just have to try harder this next time.
(p.s. to be fair, the above article does end with bankruptcy guidance, so at least it gives people assistance for when the strategy fails - as always, you can't make this shit up...).
