Courtesy of John Nyaradi.
VIX and VIX ETNs jump sharply on fiscal cliff fears and equity market meltdown.
VIX and VIX ETNs spiked higher Wednesday as global equity markets continued their decline. Read: Fiscal Cliff Sends Stocks, ETFs and Apple Off Cliff
VIX, the CBOE S&P 500 Volatility Index, also known as “the fear index,” jumped back above its 200 day moving average as fear rocked world markets, President Obama held a press conference and Israel rocketed a Hamas leader in Gaza and the posted the attack on You Tube.
chart courtesy of StockCharts.com
In the chart of VIX above, we can see how the index spiked to 17.92 today, closing above both its 50 and 200 day moving averages as momentum started to turn positive.
VIX and VIX ETNs move inversely to equity and ETF prices and so today’s sell off in the major U.S. stock indexes fueled the action in VIX. Still, the index remains well below its long term average of 20 and so has the potential for higher moves ahead.
Volatility Index – New Methodology (VIX): Index: 17.92, +7.6%
Major VIX ETNs:
iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX): +3.3%, This ETN is designed to track volatility in the markets as measured by the Chicago Board Options Exchange Market Volatility Index (CBOE Index), a popular measure of the implied volatility of S&P 500 index options.
VelocityShares Daily 2X VIX Short-Term ETN (NYSEARCA:TVIX): +0.75%, This ETN is designed to track 2X return on volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index.
iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ): +1.4%, This ETN is designed to track volatility in the markets as measured by the CBOE Volatility Index futures contracts.
S&P 500 Dynamic VIX ETF (NYSEARCA:XVZ): +0.1%, This ETN is designed to track volatility in the markets as measured by the S&P 500 Dynamic VIX Futures Total Return Index.
Velocity Shares Daily Inverse VIX Short-Term ETN (NYSEARCA:XIV): -3.48%, This ETN is designed to inversely track the volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index.
Bottom Line: VIX and VIX ETNs continue spiking higher as volatility increases over the ongoing fiscal cliff debate and the fear it generates. While now in a bull market, VIX will remain volatile and needs to break 18.5-19 levels to confirm a solid uptrend. However, as debate over taxes and deficit reduction rages, VIX and VIX ETNs will most likely continue to rage, as well.
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