Tuesday, December 20, 2016

VIX versus XIV Perspectives....12.20.16

Below note the current status of the VIX volatility index....hitting 2 year lows..again... and the odds SHOULD favor a bounce which equals a down swoon.
However, the current market is anything but typical and the VIX ETF inverse..the XIV... has been on a tear and continues to look very tradable at least short term.
Below are 3 screen shorts of the current VIX signals:
M1 momentum model, MVP mean reversion model and MVP momentum model.
So why don't we use the VXX ETF for comparison to the VIX rather than the XIV which is inverse to the VIX? The reason is the intrinsic nature of the VXX, which has a built in erosion factor due to its construction and as such it is often not reflective of VIX behavior.
For now the XIV trend is up and the Santa Claus rally (Dec 23 to Jan 1) may goose the markets to ever higher highs before new year tax selling begins.