In volatility ETFs, VXX slipped 2.5% and ProShares Ultra VIX Short-Term Futures ETF (NYSEArca: UVXY) dropped 5%. The products are designed to replicate the performance of futures based on the CBOE Volatility Index, Wall Street’s fear gauge.
Technical analyst Tarquin Coe at Investors Intelligence says VIX ETFs can fall further.
“The S&P 500 is at record highs and yet there is room for complacency. The VIX is above the level of its March low,” Coe wrote in a newsletter Friday.
Momentum indicators suggest the VIX is not oversold, he added.
“Consequently, the VIX has ample room to go south, a move which would coincide with equity indexes pushing higher,” the analyst said. “Our advisor sentiment survey this week also reveals a lack of excessive optimism. Major tops need a sentiment extreme and that is just not yet apparent.”
Full disclosure: Tom Lydon’s clients own SPY and TLT.