Investors seem to think Monday’s stock sell-off was only a hiccup and that the rally is set to resume, based on this week’s action in exchange traded funds (ETFs) that track CBOE Volatility Index futures.
ETFs that follow VIX futures jumped Monday after Standard & Poor’s warned it may downgrade its credit rating on the U.S. due to the massive debt load.
The VIX soared more than 20% at one point Monday but eased back later in the session.
Wall Street’s so-called fear gauge was down about 7% heading into Tuesday’s closing bell as stocks recouped some of the previous day’s losses. Exchange traded products such as the $1.5 billion iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) followed lower.
“Buyers of volatility have been whiplashed in recent months as economic concerns have sparked only brief periods of fear,” wrote Cullen Roche at Pragmatic Capitalism on Tuesday.
ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY)
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