Friday, 20 May 2016

TVIX, UVXY - cooling into the weekend

With the VIX still yet to show any sustained/significant upside power, the 2x lev' bullish volatility instruments of TVIX and UVXY cooled into the weekend, with net weekly declines of -7.6% and -7.7% respectively.

TVIX, daily

UVXY, daily


*first, an update on the VIX, which saw a minor net weekly gain of 1.1%

The VIX remains broadly subdued, as despite the market sliding from the high of sp'2111 to 2025, the style of price action is very choppy... and that hasn't inspired any fear in the mainstream.

Underlying MACD (blue bar histogram) is set for a bullish cross within 2-3 weeks, and that will offer the first realistic opportunity for powerful VIX upside.

As ever though... VIX tends to spike very quickly... and almost as rapidly... cools.

As for TVIX and UVXY, it could be argued they are trying to make a floor, but if VIX doesn't break into the 20s within a week or two.. they are going to merely decay further.

Broadly.. the US equity market looks highly vulnerable to the third major down wave since summer 2015. The big unknown is just how high that might drive the VIX... just the high 20s... or far higher... to the 40/50s - as seen last August.