Tuesday 22 January 2013

TVIX, UVXY - the never-ending pain

With the main indexes continuing to melt up, and the VIX stuck in the low 13s, the 2x (bullish) VIX instruments of TVIX and UVXY continue to decline..on their permanent long term trend to zero.


TVIX, daily



UVXY, daily



Summary

TVIX and UVXY declined for the 13th day - from 15, since the VIX peaked @ 23.23 on Friday Dec'28th (in AH trading).

An outright nightmare for those holding - even from just last Friday afternoon!

*at the current rate of decline, both will need another reverse split within a month or two.

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VIX, daily



The underlying MACD (blue bar histogram) on the VIX does look like we'll see it go positive cycle later this week, certainly by this Friday/ next Monday, but how far up ?

At best, maybe a straight forward gap fill in the 16-18 zone? Anything over 18 just seems completely unlikely until the late Spring - and thats assuming the US economy slips into a moderate recession.
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QE3 - the one that will never end, is fully underway now, with 45bn of POMO money per month..every month. That will certainly help to prop up the market.

The VIX will thus likely stay under the important 20 threshold for many months to come, and if that is the case, then anything that is long volatility, will relentlessly decay.