VIX setup for trip to the Moon 🌚!
China's Evergrande Group filed for Chapter 15 bankruptcy protection in a U.S. court.
The company referenced restructuring proceedings in Hong Kong, the Cayman Islands and the British Virgin Islands.
Evergrande is the world's most indebted property developer and defaulted in 2021.
Chapter 15 bankruptcy protection allows a U.S. bankruptcy court to intervene in cross-border insolvency case involving foreign companies that are undergoing restructuring from creditors.
Tianji Holdings, an affiliate of Evergrande, and its subsidiary, Scenery Journey, also filed for Chapter 15 protection in Manhattan bankruptcy court.
Evergrande's filing comes amid contagion fears that China's property sector troubles could spill over to other parts of the economy.
Country Garden, which used to be one of China's largest developers, also struggled to make coupon payments on U.S. dollar-denominated bonds and issued a profit warning.
China's massive real estate sector has long been a vital engine of growth for the world's second-largest economy.
Evergrande posted a combined loss of $81 billion over the past two years.
The bankruptcy filing was signed by Jimmy Fong, who listed himself as a “foreign representative” of China Evergrande Group.
VIX Breakout Setup
The VIX, or the fear index, has been on the rise in recent weeks, setting up a potential breakout.
VIX pricing pattern is showing higher-lows and higher-highs, which is what it does when systematic strategies and consensus hedge fund positioning are off-sides at the same time. This is a sign that volatility is likely to continue to rise in the near term.
The August options expiration (OPEX) is today, which could also add to volatility. OPEX is a time when large hedge funds and other market participants rebalance their portfolios, which can lead to increased volatility.
Overall, the setup for a VIX breakout is in place. Investors should be prepared for increased volatility in the coming weeks.
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