Friday, 12 February 2016

TVIX, UVXY - a second week of gains

Despite cooling into the weekly close, the 2x lev' bullish VIX instruments of TVIX and UVXY climbed for a second consecutive week, both with net weekly gains of 17.2%. Near term outlook offers a continued equity bounce into the sp'1900s, with VIX cooling to the 22/18 zone.

TVIX, daily

UVXY, daily


*first, an update on the VIX, which saw a net weekly gain of 8.6%

As for TVIX/UVXY, note the Thursday black-fail candle. Often indicative of a short term exhaustion top, which was arguably confirmed with Friday's significant net daily decline.

With the VIX set to cool for much of next week, TVIX/UVXY look liable to retrace at least 15/20%. Right now, TVIX in the 8s looks probable.

In any March/April 'major market upset' equity down wave, TVIX/UVXY should in theory increase by a multiple of 4-5x. 

It is notable, in the 12 day equity collapse of July/August 2011, TVIX increased 7x.

As ever, holding longer for more than a few weeks is highly problematic, primarily due to underlying statistical decay factors. Indeed, the higher the volatility level, the worse the level of decay is.

I am seeking to be long VIX from the next cycle, as it would seem the VIX is set for far higher levels in March/April, the 40/50s look very viable if sp'1750/25 - which is a pretty basic target for this spring.