After falling 26% from the July 8th high the XIV has seen a retrace and is now trading 15% up off the August 8th low. The smaller degree wave structure of the move up off that low has been very sloppy and has already provided quite a few twists and turns.
This type of action was not entirely unexpected as this is what we expect when we are within what we call in Elliott Wave terms a ‘Fourth Wave’. I noted this last week when I wrote that, ‘Fourth waves are some of the more difficult patterns to project and typically requires traders to be nimble…’
We may, however, be close to the point where we will once again see some clean and tradable setups coming our way in the XIV.
In 2015 I read an article discussing how the XIV was “The #1 stock in the world”. That article was published on June 8th, 2015, and generated quite a bit of interest and discussion at the time of its publication. Fifteen days later, on June 23rd, 2015, the XIV topped and proceed to lose 69% of its value over the course of the next 6 months. During that same time period, the Dow Jones Industrial Average lost just 15% of its value. Furthermore, it took the XIV 1 years and 233% in gains to recover the losses that were incurred during that move lower in the XIV.
On Monday, August 28th of this year, The New York Times published an article highlighting the exploits of a trader who is said to have turned $500,000 into $12 million. It was reported that this was done over the past five years by shorting the VIX through various Exchange Traded Notes. Apparently, this trader is now attempting to start a Hedge Fund to raise $100 million dollars using the same short VIX strategy.
This post was published at GoldSeek on Wednesday, 30 August 2017.