Thursday 6 December 2012

TVIX, UVXY - trying to claw higher

Whilst the main indexes are barely 0.5% from the recent high of sp'1423, the 2x leveraged bullish VIX instruments - TVIX, and UVXY, are trying to form a floor, and managed moderate gains today.

TVIX, daily

UVXY, daily


So...yet another attempt is being made to form a floor, and begin a rally. We've been here many times before, and the two charts above show a history of endless disappointment. The statistical decay inherent in such leveraged instruments of course means they will inevitably head for zero

Trading volume seems to be drying up lately, this is especially the case for TVIX, where I guess most traders are simply avoiding it because of the low price <$1. The bid/ask spread alone will be a deterrent to trading TVIX.

*I remain surprised that Velocity Shares, have not yet instituted a 1 for 20 split in TVIX.

VIX, weekly

The bigger weekly chart is still trying to battle higher. The VIX 20 level will be an absolutely key signal for those seeking a major wave lower in the indexes, with a corresponding massive ramp in both TVIX and UVXY.

So, watch for VIX'20, although considering the relentless - and regular, mini-ramps in the indexes this week, VIX 20 seems unlikely this side of Christmas.

As ever, both TVIX and UVXY are for short-term trading only. Holding TVIX or UVXY for more than a few weeks - even when the VIX is trending higher, always ends....badly. The charts clearly display that.