VIX Rising, S&P Flat — Is a Crash Brewing?

Good evening, everyone.$Gold - main 2604(GCmain)$ $E-Micro Gold - main 2604(MGCmain)$ $1-Ounce Gold - main 2604(1OZmain)$

I’ve compiled the key points from the February 5 session into a ready-to-read transcript, so those who missed the live broadcast can easily catch up and review. $Silver - main 2603(SImain)$ $E-mini Silver - main 2603(QImain)$ $Silver - Mar 2026(SI2603)$ $Gold - main 2604(GCmain)$ $E-Micro Gold - main 2604(MGCmain)$ $1-Ounce Gold - main 2604(1OZmain)$

At the start of the class, the instructor first recapped last week’s sharp volatility in gold and silver: “After Thursday’s live session, on Friday and Monday, gold—and together with silver—experienced a historic plunge.” He emphasized that he had already warned beforehand that “major swings in commodities were expected around late January to early February.”

The main focus of this session was: continuing the discussion on U.S. equity indices, and providing an update on his latest views regarding the U.S. Dollar Index, gold, and silver.

The core theme of this session was “The Fed Chair Nomination Is Now Official.” The instructor stated that this nomination “is widely seen as the direct catalyst behind the recent sell-off in gold, silver, and U.S. equities.”$Silver - main 2603(SImain)$ $E-mini Silver - main 2603(QImain)$ $Silver - Mar 2026(SI2603)$

Since the beginning of the year, the market has shown a clear rotation: capital has been “flowing out of richly valued tech and software companies and into other sectors tied to the economic cycle, policy shifts, and market momentum.”

He repeatedly urged attention to “Main Street sectors”—those closely linked to the real economy—and specifically highlighted transportation, retail, mining, and energy. He emphasized that many individual stocks within these sectors have already posted “extremely strong absolute gains.”$Silver - main 2603(SImain)$ $E-mini Silver - main 2603(QImain)$ $Silver - Mar 2026(SI2603)$

U.S. Equity Framework: VIX, Skew, Gamma Wall, CTA, and Liquidity $USD Index(USDindex.FOREX)$ $XAU/USD(XAUUSD.FOREX)$

At the index level, the instructor provided a very clear structural observation: although the S&P 500 has appeared calm within its “three-month-plus” trading range, “the VIX floor has been steadily rising.” He noted that this pattern “closely resembles the setup seen just before the sharp selloff from early 2025 through April.” $Gold - main 2604(GCmain)$ $E-Micro Gold - main 2604(MGCmain)$

The options market is also signaling risk: he pointed out that “skew is rising,” which means “investors are buying puts even as they go long U.S. equities”—a sign of growing hedging demand.

Looking further ahead, he highlighted that the S&P 500 is approaching a “relatively strong gamma wall” around the 7,000 level. As a result, “upside moves will become more difficult, while downside moves will face less resistance.” In short: “downside favored, upside constrained.” $NASDAQ(.IXIC)$

On the behavior of capital flows, he referenced a CTA (Commodity Trading Advisor) fund flow model: during rallies or sideways markets, inflows are relatively modest, but in a downtrend, outflows amplify significantly. He stated, “This also makes downside moves more favorable—the path of least resistance is clearly downward.”

He also provided key threshold levels: the medium-term pivot point is around 6,700, and the long-term support level sits near 6,200. $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2603(ESmain)$

Another critical backdrop is weak liquidity. He cautioned that “liquidity is relatively thin… with about $15 million in market liquidity set to be withdrawn,” and stressed that in such an environment, “when prices start falling, they’re more prone to collapse-style drops.” The recent sharp plunge in gold and silver was a textbook example of this—“no buyers stepping in, leading to a long-squeeze-driven crash.” $Gold - main 2604(GCmain)$ $Silver - main 2603(SImain)$

February Seasonality: Why the Second Half Deserves More Attention

The instructor presented a clear historical statistic: based on nearly 100 years of data since 1928, “February is the second-worst performing month of the year,” and specifically, “the market tends to decline starting in the second half of February.”$Silver - main 2603(SImain)$ $E-mini Silver - main 2603(QImain)$ $Silver - Mar 2026(SI2603)$

His explanation was straightforward: the first half of February often carries over the “January effect,” as investors execute their annual allocation plans and aggressively buy assets. But by the second half, “fresh buying interest fades,” making the market more prone to sideways movement or pullbacks.

He also cited researcher Ruben’s observation: the first half of February is typically supported by corporate buybacks and retail investor inflows, but by the latter half, both retail and institutional buyers “have largely finished their purchases.” This coincides with tax-related selling pressure and seasonal rebalancing by mutual funds, further increasing the likelihood of a decline.

Trading Takeaways: Using Options to Navigate Volatility — How to Position in Gold/Silver and U.S. Equities

Regarding U.S. equities, the instructor used a real-time example to illustrate how to trade volatility: on February 4, as the Nasdaq approached a critical technical level, he chose not to bet on whether it would surge or plunge, but instead implemented a long straddle (buying both a put and a call).

The specific structure was: $YieldMax ABNB Option Income Strategy ETF(ABNY)$ $YieldMax AMD Option Income Strategy ETF(AMDY)$ $YieldMax AMZN Option Income Strategy ETF(AMZY)$

• Buy a 24,950 put

• Simultaneously buy a 25,650 call
  — creating a 700-point wide strangle. At the time, both options had very low deltas (around 0.08–0.09).

He shared the outcome:

• Entry cost was 31 points (maximum risk ≈ $623)

• Within hours, he exited at 149, achieving a five-fold return

He emphasized: “This isn’t about copying trades—I’m giving you a framework for thinking about volatility.” $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2603(ESmain)$

IGV Analysis $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2603(ESmain)$

• Price Action & Indicators: The North American software ETF (IGV) has declined more than 30% since peaking in November last year. It posted a long lower wick yesterday and is now trading at oversold levels not seen since 2011. Weekly technical indicators suggest a potential mean-reversion trade may be emerging.

• Institutional Views: J.P. Morgan believes investors’ concerns about artificial intelligence are overblown. Jensen Huang (CEO of NVIDIA) also argues that the idea of AI replacing software companies is illogical. Time will tell whether the recent sell-off in software stocks will be corrected.

  

  Regarding precious metals, he reiterated his earlier view: silver has entered a phase of historically extreme volatility—with high speculative characteristics—and therefore is not recommended for large-scale trading; attention should shift to gold instead. Gold, too, has seen its volatility rise to historical highs, and he advised using spread contracts (or spread-based strategies) rather than outright directional bets.

  On the timing of gold prices, he recalled his public call from December, in which he had already anticipated that “gold would form a significant intermediate-term (not long-term) top in January–February.” Currently, gold has entered a consolidation phase: after rebounding to around the 50% retracement level of its prior decline, it will likely need further sideways consolidation before choosing its next direction.

  

U.S. Dollar Analysis $USD Index(USDindex.FOREX)$ $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2603(ESmain)$

• Weekly Chart Structure and Price Action: The dollar’s weekly chart has formed a hammer candlestick pattern. Looking back over recent years, this structure has typically been followed by a pullback, suggesting the current level could mark a short-term low. $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2603(ESmain)$

• Economic Data vs. Exchange Rate Divergence: U.S. economic data has recently surprised sharply to the upside, with growth forecasts revised higher, while eurozone growth expectations have been downgraded. Despite this favorable fundamental backdrop for the dollar, the euro has strengthened against it—diverging from economic fundamentals. This anomaly stems partly from politically driven sentiment among some traders, with dollar-selling pressure now comparable to the peak levels seen in 2015.

  

  

  • Gold and Silver Analysis $Gold - main 2604(GCmain)$ $E-Micro Gold - main 2604(MGCmain)$ $1-Ounce Gold - main 2604(1OZmain)$

  • Price Review and Outlook: In December, it was forecast that gold would form a significant intermediate-term top in January–February. Gold has now indeed staged a short-term peak, while silver may have marked a medium- to long-term top. This week, after forming a bearish shooting-star candle at resistance, gold plunged sharply. It subsequently rebounded to around the 50% retracement of its prior decline and has since entered a consolidation phase—requiring further sideways movement before a new directional trend emerges.$Silver - main 2603(SImain)$ $E-mini Silver - main 2603(QImain)$ $Silver - Mar 2026(SI2603)$

  • Volatility and Trading Recommendations: Both gold and silver are currently experiencing volatility levels at historical extremes, and options market liquidity is poor. It’s advisable to trade during U.S. market hours. Large-scale positions in silver are not recommended; instead, focus on gold. When participating, consider using defined-risk options strategies (e.g., straddles or strangles with built-in stop-loss features) or short-term intraday futures trades to navigate the heightened swings.

The final reminder is also crucial: in a year marked by persistently high volatility and sharp, fast-moving price swings, if you choose to participate, the instructor recommends using options “two-legged” strategies (e.g., straddles or strangles) that inherently include stop-loss protection, or trading intraday swings with futures—but above all, prioritize risk management above everything else.$Silver - main 2603(SImain)$ $E-mini Silver - main 2603(QImain)$ $Silver - Mar 2026(SI2603)$ $Gold - main 2604(GCmain)$ $E-Micro Gold - main 2604(MGCmain)$ $1-Ounce Gold - main 2604(1OZmain)$