VIX erases gains by 10% as markets see lower short-term possibility of Israel-Iran escalation

The VIX Volatility Index erased the rapid gains it had been recording during the overnight and early morning hours. Futures fell in response to Israel's probable shelling of Iran, as the situation did not prompt an immediate response and Iranian media reassured that the attack did not cause any, serious damage. As a result, risky assets including the Nasdaq 100 (US100) gained, and the VIX erased more than 10% of its upward move; it is now trading just 0.5% higher. 

US100 vs. VIX (M15 interval)

The drop on the VIX came as the US100 bucked the deeper sell-off caused by Israel's attack on Iranian shelling. Since Iran did not respond immediately, short-term concerns about the conflict fell; as also seen today in oil prices. On the other hand, however, the upward movement in contracts was accompanied by relatively low volume and the decisive reaction will be decided after Wall Street opens.

Source: xStation5

Fed Kashkari

• Kashkari of the Fed indicated that rate cuts may not come until 2025
• When inflation reaches 2%, the Federal Reserve will start cuts
• We will wait as long as it takes for inflation to come down, and we must be patient
• The still surprisingly strong housing inflation surprised me

US Secretary of State Blinken

• The U.S. cannot and will not support a possible military operation in Rafah (Gaza) and cannot confirm Israel's shelling of Iran; the Pentagon has not been involved in any offensive operation
• U.S. does not see direct arms shipments from China to Russia, but does see critical components being delivered
• A survey of Bank of America FMS asset managers indicated that the stock market recently experienced the largest capital outflows since December 2022. ICI data indicated that money in money market funds (MMFs) fell by $112 billion to $5.97 trillion as of April 15. According to WSJ sources, the U.S. intends to provide Israel directly with the largest aid package since the Gaza investment, amounting to about $1 billion

VIX (H1 interval)

Source: xStation5

VIX (D1 interval)

The contract increases have reached the 'trend line' marked by the tops of recent increases, although it is worth considering that they took place on a series of different contracts. The RSI indicator signals a still 'overbought' index, which in the past was mostly associated with downward pressure (except for deeper market declines, when the index stayed in the 'overbought' zone for a long time).

Source: xStation5