The ProShares Ultra VIX Short-Term Futures ETF (UVXY) is an instrument that offers leveraged exposure to short-term VIX futures contracts, which are directly tied to market volatility. The ETF aims to provide 1.5 times the daily performance of the S&P 500 VIX Short-Term Futures Index. This unique positioning makes UVXY a focal point for investors during periods of heightened market volatility.

Recent Price Movements

From July 15-18, 2024, UVXY saw a significant gains, with its price rising from $20 to $24. This increase reflects recent upward momentum in the ETF’s price, highlighting its responsiveness to short-term volatility spikes.

Inverse Relationship with Market Stability

UVXY typically benefits from market instability. Concerns about economic conditions, geopolitical events, or other factors that could spike market volatility often lead to increased demand for the ETF. However, it is essential to recognize that UVXY is a highly volatile instrument designed for short-term trading. Its value can fluctuate rapidly based on market conditions and investor sentiment.

Long-Term Performance and Investor Caution

Despite its potential for short-term gains, UVXY has shown significant negative returns over longer periods. As of June 26, 2024, the ETF had a year-to-date return of -43.70% and a one-year return of -76.58%. These figures highlight the inherent risks associated with holding UVXY for extended periods.

Investors should approach UVXY with caution. It is tailored for sophisticated traders who understand the risks linked to leveraged and volatility-based products. Thorough research and consultation with a financial advisor are recommended before making investment decisions involving UVXY.

Anticipated Market Volatility in Late 2024

The VIX futures curve reveals notable jumps in expected volatility for October and December 2024. This pattern indicates that market participants are bracing for higher volatility in these months, driven by several factors:

1. Uncertainty Surrounding US Elections: The November 2024 US elections introduce significant uncertainty, with potential concerns about the certification of presidential election results in early January 2025, influenced by the events of January 2021.
2. Geopolitical and Economic Landscape: Ongoing conflicts in Ukraine and the Middle East, unsustainable debt levels, and the contentious US election contribute to a gradual increase in market anxiety.

Rising VVIX and Historical Context

The VVIX, which measures the volatility of the VIX itself, rose by 2.76% to 83.86, indicating growing uncertainty about future market conditions. While the VIX level of 13.59 remains relatively low compared to historical spikes seen during major events like the COVID-19 pandemic, the current increase seems part of a broader trend of escalating market uncertainty focused on late 2024 and early 2025.

Broader Market Trends and Implications

The recent market behavior shows a notable rotation into small-cap stocks, with the Russell 2000 index rising by 9% while the Nasdaq 100 declined by 4%. This represents the widest underperformance gap for big tech since 2000 and 2001, according to Bespoke. This shift could signal a broadening of market leadership or indicate underlying market instability.

Additionally, the outperformance of consumer staples—recording their third-best day relative to the QQQs in 15 years—highlights investor interest in defensive trades. While outperformance in industrials and cyclicals is common, a surge in consumer defensive trades suggests heightened market caution.

The Guerilla Stock Trading Action Plan

1. Monitor Market Volatility: Regularly check VIX levels and market news for volatility signals.
2. Utilize Technical Indicators: Use tools like MACDThe MACD indicator is essentially a momentum indicator that shows the relationship between two different moving averages of price. The MACD is the difference between the 12-period ... More and trading volume to assess entry and exit points.
3. Evaluate Market Events: Stay informed about geopolitical and economic events that may impact volatility.
4. Risk Management: Only invest if you fully understand UVXY’s risks and consider consulting a financial advisor.

Blind Spot

Investors may overlook the long-term negative performance of UVXY, focusing solely on short-term gains without considering the inherent risks of holding the ETF for extended periods.

UVXY Technical Analysis

The chart depicts the Ultra VIX Short-Term 2X Futures ETF (UVXY) with key indicators to provide a comprehensive technical analysis.

The price trend shows a general downward movement, with the 50-day moving average (blue line) at 25.11 and the 200-day moving average (red line) at 43.66, both indicating a bearish trend. However, the recent price increase to 23.90 suggests a potential short-term recovery or a temporary pullback within the longer-term downtrend.

Volume analysis shows a significant spike in trading volume, suggesting increased interest and potential volatility. The Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI) is at 54.84, indicating a neutral condition, slightly leaning towards bullish momentum but not in overbought territory.

The On Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV) is at -159,477,945, reflecting a downward trend, which usually correlates with a bearish price movement. The Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More is at 1.000, signaling that the ETF is currently overbought and might face a potential pullback.

The Average Directional IndexThe Average Directional Index (ADX) stands as a cornerstone indicator in the toolkit of technical traders, offering insights into the strength of market trends. Developed by Welles... More (ADX) is at 17.44, indicating a weak trend. Since the ADX value is below 20, it suggests that the current trend is not strong, whether bullish or bearish.

The Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More is at 8,512,199, showing a positive reading, which might indicate that there is some accumulation or buying pressure in the market.

Time-Frame Signals:

• 3 months: Hold
• 6 months: Hold
• 12 months: Sell

The rise in UVXY’s price is supported by technical indicators. Notably, the 3-month Moving Average Convergence Divergence (MACD) indicator flashed a buy signal, and trading volume was on the rise along with the price.

Past performance is not an indication of future results, and this article should not be considered as investment advice. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Looking Ahead

The ProShares Ultra VIX Short-Term Futures ETF (UVXY) offers leveraged exposure to market volatility, making it a valuable tool for traders during periods of uncertainty. Recent price movements, technical indicators, and broader market trends underscore its potential for short-term gains. However, its long-term performance and inherent volatility necessitate a cautious approach. Investors should conduct thorough research and consider professional advice before engaging with UVXY, particularly given the anticipated market volatility in late 2024.

Frequently Asked Questions about ProShares Ultra VIX Short-Term Futures ETF (UVXY)