Much better expected earnings from tech bellwether, INTC, after market close Tuesday is all market needed today, the broad equity markets enjoy one of the biggest gain days in the second quarter. Since opening bell, all indexes were steadily moved upward throughout day. However, underneath this optimism, there were certainly some, say the least, doubts about how long this three day rally may last. Most noticeable sentiment indexes, VIX and VXN, moved up lock steps with SPX and NDX, closed at 25.89 and 25.28 respectively (see chart below.) VIX was actually 3.4% higher than previous day. Even markets rally, the "fear" seems increased as the trading session progressed during the day. There was only one occasion when the market (S&P500) climbed over 2% and VIX also increased since 2005 (data no shown,) coincidentally or not, it was one month ago (6/1). We knew what happened in the month of June.
For the near term bull believers, the bad news may come from the derivative markets. For the first time in the last two years, the total call option open interests exceeded 1.6 millions contracts (see Bloomberg chart below, only 1 yr data shown.) we may not be surprised to see VIX spikes and some stormy trading sessions near term.
