Friday, 4 November 2016

TVIX, UVXY - powerful net weekly gains

With equities sliding for a second week, the VIX continued to climb, and that resulted in the 2x lev' bullish instruments of TVIX and UVXY seeing powerful net weekly gains of 28.4% and 28.3% respectively. Near term outlook offers further VIX upside to 25/30, before cooling into end month.

TVIX, daily

UVXY, daily


First, an update on the VIX, which saw a net weekly gain of 39.0%

As for TVIX and UVXY, it was indeed a rather strong week, with both pushing up against first resistance of their upper daily bollingers.

Clearly, the mainstream and market are NOT expecting a Trump victory. Considering current equity downward momentum, there is HIGH potential for a major equity washout/capitulation next Wednesday.

With the VIX already having seen the 23s, next target of 25/26 looks easy. The 30s now look rather probable.. whether into the Tuesday close.. or at the Wed' open.

Special note...

It should be clear that once the election result is absorbed by the mainstream/market, that volatility - whether VIX 25, 30.. or even far higher, will be extremely prone to cool for the remainder of the month.

Unless equities completely implode (<sp'1900), the VIX is not going to be able to sustain above the key 20 threshold.

TVIX and UVXY would thus lose not just all of their gains, but break new historic lows before year end. The very nature of such instruments means the higher the volatility, the more severe the problem of 'statistical decay' becomes!.