VIX Fades on Global Good Feelings (VXX, XIV, TVIX, VIXY)
Global good feelings and optimism were in vogue today and so VIX, the CBOE “fear index,” faded to end the week on a weak note.
Today’s economic news was good and global markets rallied on hopes for a settlement to the Greek debt crisis. In response, VIX declined 7.5% for the week to end close to where it started on Monday.
VXX ETNs react to positive mood:
iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) declined 1.2% on the day
VelocityShares Daily Inverse VIX Short Term ETN (NYSEARCA:XIV) gained 1.46% as the inverse ETN moved opposite to the underlying index and so gained in value on the day.
VelocityShares Daily 2x VIX Short Term ETN (NYSEARCA:TVIX) dropped 2.85% as the 2X leveraged ETN declined at more than twice the rate of the underlying VIX index.
ProShares VIX Short-Term Futures ETF (NYSEARCA:VIXY) shed 1.58% as interest in VIX waned.
chart courtesy of www.stockcharts.com
Looking at the chart of VIX (NYSEARCA:VXX) we can see that MACD is rolling over as positive momentum leaves the market and RSI turns down. On the chart itself, we see a gap down but one that stopped at significant support levels. Overall we see that VIX (NYSEARCA:TVIX) has been in a medium term downtrend but turned a pivot in early February on technical support and news from Greece.
chart courtesy of www.stockcharts.com
The point and figure chart of VIX (NYSEARCA:VXX) shows us that the “fear index” is still in a bullish configuration with an upside target of 30 which would be a gain of approximately 60% from here. However, you can also see that the last column of red “Os” stopped right at significant support at 18. A drop below here would be a “double bottom” breakdown and a sell signal for VIX (NYSEARCA:TVIX)
Bottom line: VIX made an impressive pivot earlier in February and spiked higher, challenging its 50 day moving average before falling backwards. Now it rests on significant support and so the battle will rage over whether support can hold or if the longer term bear market will resume. VIX moves inversely to stock prices and so the outcome of this battle will affect equity prices, as well. The long President’s Day weekend just ahead will give both bulls and bears plenty of time to contemplate what might lie ahead.
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