Thursday, December 20, 2012

T2 and VTV View...12.20.12

GLD and TLT show continued weakness and volume dries up ahead of the holidays.  IWM continues to eke out small gains and remains the T2 top pick.  XLV slid off the top 2 list on the 17th, missing the rally on the 18th but avoiding the big drop on the result...good save. Based on our risk management caveat in the lower left of the T2 metric panel, IWM is the sole holding currently.

Just for entertainment I've put up the modified VTV view (click on image once to enlarge) only in this case I've made XIV the benchmark and SPY just one of the pair components.  Now you can see how wild VIX actually is.  Love to have that 94% retrun over 2 years but that 79% drawdown might give you an ulcer along the way.  That's why we trade this ONLY SHORT TERM and USE second guessing.

Note that I've dropped VXX off the mix and in a future post I'll show why this may be a prudent move in analyzing the potential of these trades.  When VXX was first issued 2 years ago I ran a series of posts suggested that this was the shorting opportunity of a lifetime and that the only way VXX could go was down.
For now we'll just excuse VXX from any trading consideration and just use it as a statistical benchmark with a built in decay function.