Exchange traded funds that profit from higher market volatility pulled back sharply on Tuesday, suggesting traders see the rally marking a short-term bottom in stocks.
The Dow jumped over 100 points on Tuesday while more than 80% of NYSE-listed stocks were advancing.
The iPath Long Enhanced S&P 500 VIX Mid-Term Futures ETN (NYSEArca: VZZ) was down nearly 10% at last check.
The exchange traded note and other products like it are designed to reflect the performance of futures contracts based on the CBOE Volatility Index. Traders count the VIX among the tools they use to measure fear in the markets.
ETFs that track VIX futures can be used to play market pullbacks or hedge, although they are much more complex than first-generation ETFs that follow stock indexes.