VIX ETFs Confused: Weekly VIX ETF Report
VIX ETFs were confused this week after VIX ETFs’ performance differed from VIX Index results
VIX ETFs finished confused this week, with the VIX Index rising 3.45% to close at ’12.89,’ while the iPath S&P 500 VIX Short Term Futures ETN (NYSEARCA:VXX) lost 4.30%, and the VelocityShares Inverse VIX ETN (NYSEARCA:XIV) gained 4.9%.
Typically, the VIX Index goes down when equity markets rise as investors feel less fear in the marketplace. This week, however, the VIX Index rose alongside rising equity markets, suggesting that the VIX Index is possibly firming up in anticipation of flat or lower equity prices ahead. Such a divergence between the fear index and equity markets suggests that investors are skeptical of major equity indexes rising above the psychologically important (and all time high) S&P 500 1570 level. Additionally, the Fiscal Cliff part II and III are still on the horizon, despite Congress kicking the debt ceiling debate “can” down the road little bit further, thus stoking the flames of fear (and thus higher VIX prices) a little higher.
VIX ETFs, on the other hand, had a confusing week, as the iPath S&P 500 VIX ETF (NYSEARCA:VXX) lost ground, despite the VIX Index rising. Long volatility ETNs (NYSEARCA:VXX, NYSEARCA:TVIX) declined because of the VIX term structure and contango in the futures contracts. The VIX Index however appears to have put in a short term bottom and is again rising in anticipation of higher volatility ahead. Below is a chart of the VIX Index for this past week:
chart courtesy of stockcharts.com
Looking at the chart of the VIX Index above, simple technical indicators still point to lower prices, despite the new “bottom” that the VIX found this past week. The RSI is still oversold with a reading of 42.61, while the MACD is still at -.334, so all in all, we are likely looking at declining prices, unless of course Congress heats things up in the next few months.
Weekly VIX ETF Update:
Volatility Index – New Methodology (VIX): Index: 12.89, +3.45%
iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX): -4.30%, This ETN is designed to track volatility in the markets as measured by the Chicago Board Options Exchange Market Volatility Index (CBOE Index), a popular measure of the implied volatility of S&P 500 index options. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets. The iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) prices itself off of the average and implied volatility of the first two months of futures contracts of the S&P 500 Index.
VelocityShares Daily 2X VIX Short-Term ETN (NYSEARCA:TVIX): -9.09%, This ETN is designed to track 2X return on volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index. The S&P 500 VIX Short-Term Futures Index measures the volatility of the S&P 500 Index via futures contracts as traded on the CBOE. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.
iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ): -6.74%, This ETN is designed to track volatility in the markets as measured by the CBOE Volatility Index futures contracts. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets. The iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ) is priced from the average volatility of the 4th through 7th month futures contracts of the S&P 500 Index as traded on the CBOE.
S&P 500 Dynamic VIX ETN (NYSEARCA:XVZ): -3.06%, This ETN is designed to track volatility in the markets as measured by the S&P 500 Dynamic VIX Futures Total Return Index. The S&P 500 Dynamic VIX Futures Total Return Index seeks to combine results of volatility of the S&P 500VIX Short-Term Futures Index Excess Return and the S&P 500 VIX Mid-Term Futures Index Excess Return to create an accurate market volatility reading, as measured by the CBOE. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.
Velocity Shares Daily Inverse VIX Short-Term ETN (NYSEARCA:XIV): +4.19%, This ETN is designed to inversely track the volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index. The S&P 500 VIX Short-Term Futures Index measures the volatility of the S&P 500 Index via futures contracts traded on the CBOE. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.
Bottom Line: VIX ETFs and the VIX Index appear to be confused at the moment, however it appears that the VIX Index has temporarily found a bottom in the declining madness.
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