by Rani Chopra, SmartStops.net contributor
The market has experienced unprecedented volatility and investors are getting more risk averse than ever before with equity fund outflows exceeding $61 billion since the start of May. The CBOE Market Volatility Index, (VIX) considered to be the markets fear indicator, continued to fall yesterday and is now down 12%.
Investors did not care whether they were invested in stocks, bonds, mutual funds or ETFs. Fear and uncertainty caused outflows across the board and gold became a safe haven, with gold prices rising over 24%.
In the midst of all the market turmoil, with the downgrade of the US debt and the continual downtrend of the US dollar, investors have turned to the Swiss Franc as a safe haven. The Swiss Franc is up more than 37% against the dollar compared to a year ago and has managed to rise against all major currencies amidst the fiscal problems of the Eurozone. The currency is also up 20% against the Euro from the start of the year.
Read the rest at: http://seekingalpha.com/article/287876-swiss-franc-remains-the-safest-currency-as-long-as-europe-s-debt-problems-continue
Are VIX ETFs Breaking Out? originally published at ETFTrends
Some traders have been keeping a close eye on the CBOE Volatility Index as a possible “tell” that the rally in risk assets since March 2009 may be due for a breather.
That’s why the VIX’s move above its 200-day moving average Wednesday drew the attention of investors with a technical bent.
The index, which measures the implied volatility of options contracts on the S&P 500, has been relatively subdued during the market’s recent rocky stretch. The benchmark is known as Wall Street’s favorite fear gauge.
However, the VIX was up 18% in the final hour of U.S. trading Wednesday to its highest level since March.
The largest exchange traded product following VIX futures, iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX), rose 8%.
In stock ETFs, a Nasdaq-100 fund was pushed below a key indicator in Wednesday’s sell-off. [Nasdaq ETF Lower]
CBOE Volatility Index
By Raghu Gullapalli, SmartStops.net contributor
If you are not aware of the all consuming political debate about the U.S debt ceiling that has consumed the country, then you’ve more than likely been living in a cave. Our distinguished representatives have debated the possibility of increasing the national debt and solving future deficit problems ad nauseum. Surprise, surprise we are no closer to a solution with four days to go to the deadline then we were four months ago. Unfortunately our bloviating leadership does not realize the tremendous real life consequences of this political drama.
Aside from the embarrassment of the possibility defaulting on our financial obligations as a country for the first time, there is the almost assured downgrade of our national credit rating. This downgrade may well cripple any chance of a recovery in our economy and will have cataclysmic affects in the worldwide equity markets. What does that mean for investors? Any fond memories of 2008?
For traders like me, that would involve shorting the financials, industrials, the dollar index or anything with interest rate exposure and hedging myself by buying gold, oil and going long the iPath S&P 500 VIX Short-Term Futures ETN (VXX). But for the average investor, Financial Armageddon: Part Deux.
By Raghu Gullapalli, contributing SmartStops writer – originally posted at Minyanville
At around 3 pm yesterday afternoon, an hour before the close of equity trading the Fed announced a change to the swipe fees associated with debit card transactions. The Fed decided to reduce the rate for these swipe fees from 44 cents to 21 cents. This announcement triggered an extremely strong surge in the price of the credit card companies, namely, Visa (V) and Mastercard (MA)
No doubt some of you may scratch your head and wonder why a decrease in revenues is cause for excitement. Lets get in the Delorean and go back to December of 2010. At a meeting back then, the Fed had discussed decreasing the swipe fee to as low as 12 cents per debit card transaction. That piece of news caused a precipitous price decline.
By Raghu Gullapalli, contributing writer , as originally published on Minyanville
Value investors, such as Warren Buffet, William O’Neil and Jordan Kimmel are all big proponents of the idea of buying low and selling high. All these extremely experienced investors also look at historical patterns and are always on the hunt for bargains.
Or as traders refer to it, “buying into a pullback.”
Since its ballistic drive up in late April to create new historic highs, silver has plummeted down and the market saw the kind of volatility many traders thought gone in the post financial crisis era. But rather than continue its freefall to price levels that this writer thought were more in keeping with its historic norms, silver defied expectations and has consolidated in a $5 range over the past seven weeks.
iStockAnalyst thinks there is a probability of “60% that sideways is the most likely outcome” of the NASDAQ. “Until the index breaks resistance at 2700 or falls through support at 2600, both levels are likely to act like bumper car rails”. In their view, ” the biggest July fireworks show will come from second quarter earnings and forward guidance, July’s GDP and Employment Situation reports. The trio will determine which way we go with great clarity”.
Thus they suggest a following potential plays on leveraged ETFs off the NASDAQ:
“With the market’s direction truly a flip of the coin to start the week, iStock thinks the prudent thing to do is buy a double or triple leveraged NASDAQ ETF when the index approaches support at 2610-2620ish. Sell it and buy an inverse double or triple leveraged NASDAQ ETF as it heads towards 2690. Of course, should the index start the week in the green, just turn the trading strategy upside-down and start with the short ETF first.
Leveraged ETFs that trade in the same direction as the NASDAQ:
2X NASDAQ ETF: ProShares Ultra QQQ (QLD)
3X NASDAQ ETF: ProShares UltraPro QQQ (TQQQ)
Leveraged inverse ETFs that trade in the opposite direction of the NASDAQ:
2X inverse NASDAQ ETF: ProShares UltraShort QQQ (QID)
3X inverse NASDAQ ETF: ProShares UltraPro Short QQQ (SQQQ)
SmartStops wants to remind you that when taking on a more risky play as leveraged ETFs, it is imperative that you maintain proper stop loss protection. Remember too that SmartStops does produce datapoints for ETFs that are short.
SmartStops commentary: There are critics of his calls, but Roubini in July 2006 predicted a “catastrophic” global financial meltdown that central bankers would be unable to prevent. The collapse of Lehman Brothers Holdings Inc. in 2008 sparked turmoil that led to the worst financial crisis since the 1930s. Of course predicting the markets future is challenging to say the least, with so many factors at play. Its why investor’s methodology must evolve to have protection ready for themselves at all times. You can’t survive our markets any longer by deploying a buy and hold methodolgy.
‘Perfect Storm’ warning for stocks
A “perfect storm” of fiscal woe in the U.S., a slowdown in China, European debt restructuring and stagnation in Japan may converge on the global economy, New York University professor Nouriel Roubini said.
There’s a one-in-three chance the factors will combine to stunt growth from 2013, Roubini said in a June 11 interview in Singapore. Other possible outcomes are “anemic but OK” global growth or an “optimistic” scenario in which the expansion improves.
“There are already elements of fragility,” he said. “Everybody’s kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest.”
Elevated U.S. unemployment, a surge in oil and food prices, rising interest rates in Asia and trade disruption from Japan’s record earthquake threaten to sap the world economy. Stocks worldwide have lost more than $3.3 trillion since the beginning of May, and Roubini said financial markets by the middle of next year could start worrying about a convergence of risks in 2013.