VelocityShares Daily 2x VIX Short Term ETN (TVIX): Despite Recent Surge in Volatility, S&P 500 Remains Strong
Despite the recent spike in volatility, collapse in Crude, and flight to safety in Bonds, Gold and Yen; the S&P 500 remains in a strong technical position, just 175 bps from an all-time high having held its 50 day ma for over 5 months. Moreover, Europe, EM and Emerging Market Currencies all remain in a strong position; Crude has recaptured its seasonal form; and High Yield Credit and CDS spreads have stood their ground; the sum of which continues to suggest that risk appetite remains intact.
While the weakness in yields, flatter curve, stronger Yen and break above the 200 day in Gold, may represent legitimate threats to the Bullish narrative, it is more likely for the time being that this is a natural flight to safety after a low/no volatility surge in Global equities. Importantly, the BKX established a critical intraday reversal at key support on Tuesday, but admittedly should yields and Banks break more decisively below 2.30 and 90 respectively; it would likely dictate a more defensive posture.
Absent that, with the 2/10s sitting on key long term support at the 50 week; Tech, Semi’s, Healthcare and the S&P all putting in Bullish “Hammers” right on their 50 days; Airlines starting to take off; Builders building on their success; Energy on the cusp of recapturing its 200 day; Industrials, Staples and Discretionary all consolidating recent gains in textbook fashion; and even Small Caps whistling a little DXY; there is simply no reason to succumb to a classic Bear raid in thin trade during a Holiday shortened week. Stay the course from the long side and add on further signs of stabilization in Yields and Yen in anticipation of one more seasonal surge higher.