VIX ETFs Sputter as S&P 500 Tries to Break Range
April 27th 2012 at 3:53pm by John Spence
The largest exchange traded product indexed to VIX futures is on a four-day losing streak as the S&P 500 tries to break out of its recent doldrums on better-than-expected first quarter earnings.
The $1.7 billion iPath S&P VIX Short-Term Futures ETN (NYSEArca: VXX) was on track for a weekly loss of 9% in afternoon trading Friday as investors grow more bullish on U.S. stocks.
The VIX product is testing the lows from March on easing concerns over Europe’s debt crisis and hopes the U.S. has avoided a double-dip recession.
Meanwhile, the VIX itself has dropped below the 50-day moving average, a technical indicator. Volatility products such as VXX track VIX futures contracts, not the spot price. The VIX has hovering around 16 on Friday afternoon. Wall Street’s so-called fear index briefly fell below 14 in March.
U.S. stocks on Friday shook off a weaker-than-expected report on U.S. GDP growth in the first quarter.
The four-day rally to end the week has pushed the S&P 500 above its recent trading range.
“Yesterday the S&P 500 broke above the neckline of the double-bottom pattern. Today, trading is holding that break with a pause for breath,” said Tarquin Coe, technical analyst at Investors Intelligence. “That bottom should easily propel the index back up to the 1420 region, given the relaxed momentum condition. The MACD itself will print a buy signal today, its first in five weeks.”
The S&P 500 was trading just north of the key 1,400 level in the final half-hour of U.S. trading Friday.
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