VIX ETFs are looking more bullish by the day, as the VIX Index rose 6.92% last week for the week to close at 17.00 while the iPath S&P 500 VIX Short Term Futures ETN (NYSEARCA:VXX) gained 3.3% for the week.
Click to EnlargeFrom a fundamental perspective, VIX ETFs will likely continue to rise so long as lawmakers in Washington continue to stonewall any progress on the fiscal cliff resolution. Should politicians reach a settlement and avoid the cliff, VIX should see a short term downwards move. Still, fundamental headwinds remain into the New Year, as even with a settlement, spending will decline, taxes will rise and the global economy will continue to slow. Read: Fiscal Cliff: T-15 And Counting
Technically speaking, the VIX Index and VIX ETFs have to break through their 50 Day Moving Averages to turn truly bullish.
VIX ETF Update:
Volatility Index (TSE:VIX) – New Methodology : Index: 17.00, +6.92%
iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX): +3.03%, 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 (NYSE:TVIX): +3.45%, 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.
Velocity Shares Daily Inverse VIX Short-Term ETN (NYSE:XIV): -3.17%, This ETN is designed to inversely track the volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index. The S&P 500 VIX Short-Term Futures Index measures the volatility of the S&P 500 Index via futures contracts traded on the CBOE. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.
Bottom Line: VIX ETFs will likely continue to rise so long as Washington stonewalls a fiscal cliff resolution.
For the week of December 16, 2012, we continue to HOLD Velocity Shares Short Term VIX ETN (NYSE:VIIX) in anticipation of lower equity prices and higher volatility.
We also continue to HOLD iShares 20+ Year Treasury Bond Fund (NYSE:TLT)
Wall Street Sector Selector remains in “red flag” mode, expecting lower prices ahead.
Read on for my past alerts on trading the VIX and VIX ETFs:
- Trade Volatility for the Fiscal Cliff Countdown (12/10/12)
- VIX Update: Red Flag Mode (12/4/12)
- Congress Controlling the VIX; Buy this ETN to Profit (11/26/12)