The S&P 500 and the SPDRs (NYSE: SPY) as the key tracking ETF may have just found trouble on the charts this Wednesday as the DJIA is down over 200 points and as the S&P 500 is down by more than 27 points. The Volatility Index, or VIX, that tracks the S&P 500 has also crossed above the 26.00 reading today after gains of more than 16%. With “the fear index’ up so much and with a technical breakdown, it won’t be a shock if more selling comes into play. This brings more opportunity in iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) and in the iPath S&P 500 VIX Mid-Term Futures ETN (NYSE: VXZ) exchange traded note products that aim to track the VIX.
Adam Hewison of INO, our technical analysis affiliate partner, is showing that the downside risks are growing in a short audio-video chart analysis today. Hewison noted that breaking through the trend-line would indicate a potential move down to 1060 or so in the S&P 500. In Spyders terms, that is roughly $106.00 per share of the ETF plus or minus whatever snapshot premium or discount the ETF has to the S&P 500 at any given moment.
Conversely, that would imply upside moves in the two VIX ETF and ETN products. The iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) is up a sharp 6.5% at $22.70 on over 13 million shares in mid-day trading. The iPath S&P 500 VIX Mid-Term Futures ETN (NYSE: VXZ) is far less liquid with volume of under 500,000 shares per day. Its shares are up 2.4% at $86.17 in mid-day trading.
We never rely on any single source when it comes to technical analysis. Carter Worth of Oppenheimer just on Friday gave some of the same concerns on a CNBC video after stocks had rallied so much. In fact, he noted that stocks were fairly valued in his video showing that stocks were running out of gas.
After taking a look at StockCharts.com (illustrated below) for the moving averages, we always look at the 50-day and 200-day moving averages for the Spyders. The Spyders show a 50-day moving average of $111.00 and a 200-day moving average of $108.89.
JON C. OGG