The Return of Volatility

Psycho - Shower Scene

Mastery told you volatility was back in style two weeks ago.

As we predicted the bet on the iPath S&P 500 VIX Short Term Futures TM ETN (VXX) has been fruitful.  The VXX has bounced back 12% since we said buy.

We have laid low the past few weeks and the prudent trade was talked up on Feb 13th in Where will Stocks Go from Here?  That was the same day we went 95% cash and have held that position ever since.  Forget our take, the gain in the VXX is even more impressive in the past 5 days as the VXX has rallied 18%.  The market has been more unpredictable than a blind bat on crack and volatility has finally returned.  The news has been flushed with headlines over the instability in Italy and our problems back in the U.S. with the impending March 1st deadline.  Fear has entered back in the market and it's in full swing.

The 411 via Bloomberg yesterday:

The benchmark gauge for American stock options rose the most in 18 months as partial election results in Italy and the lack of a political deal to avoid automatic spending cuts in the U.S. sent stocks tumbling.

The Chicago Board Options Exchange Volatility Index (VIX), or VIX, climbed 34 percent to 18.99 for the biggest advance since August 2011. The Standard & Poor’s 500 Index slid 1.8 percent to 1,487.85. The VIX, which measures the cost of using options as insurance against losses in the S&P 500, closed at the lowest level since April 2007 a week ago.

Congratulations to the 7 people who follow our website and actually made the trade.  For now, the headlines are ruling the fate of U.S. equities.

VXX