No change although the index is slowly approaching our buy zone – The VIX (Fear Index) continues to follow our outlook for a choppy year for stocks, over the last 6-months the VIX has already tested the 40 region 4 times and the 20 region on 3 occasions. We believe this volatile range trading will be ongoing as the stock market struggles for meaningful direction, in other words it remains a time to buy weakness and sell strength.
MM is a buyer of decent dips below 20 by the VIX in 2021.
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Our preferred vehicle to buy volatility is the $US1.5bn iPath S&P500 short-term futures ETN which we can see trading back above 20 this year i.e. 40% higher. The premise here is that we can buy volatility when it’s very low as a hedge against future volatility. However at this stage we have slightly reduced the level where we are interested in accumulating this ETF.
MM is keen to accumulate the VXX into weakness ~13.50, and below.
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NB Due to the contrarian nature of going short equities in the middle of the longest bull market in history we feel this is a relatively conservative way of fading stock market strength.
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iPath S&P500 VIX short-term Futures ETN (VXX US)
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iPath S&P500 VIX short-term Futures ETN (VXX US)
