Thursday’s ETF To Watch: Daily 2x VIX Short-Term ETN (TVIX)

ETF Database

This week, much like any other over the past six months, has been heavily focused on Greece. Tuesday (the first trading day of the week) opened strong with the Dow touching 13,000 for the first time in almost four years. But the day ended on a sour note, forcing equities to surrender nearly all of their gains, as many are still concerned over the long-term outlook for the indebted European nation. Yesterday saw Fitch downgrade Greece stating that a default was “highly likely”, which has only added fuel to the fire. While the euro zone will undoubtedly remain in the foreground for the week, investors will try to focus their attention on a number of U.S. data releases [see also Why No Investor Should Own GLD].

Today will see the weekly U.S. unemployment claims hit the market, which tends to have a measurable impact on volatility and market direction. Unemployment claims are defined as individuals who have filed for unemployment claims for the first time over the past week. As such, the lower the figure, the better, as it points to more people finding employment. Though this indicator is not the most significant, it is important to keep tabs on as it gives weekly commentary on how our economy is performing.

The report has beat estimates for the last three weeks and will to make for a solid month of wins today. Analysts have predicted that claims will fall around 352,000, up from last month’s reading of 348,000. Note that even if this data comes in as expected, the jump in claims month-to-month may still be a negative signal for trading. However, if claims come in lower than last month, it may prove that our economy is on the right track and that recent unemployment figures, which have been dropping for several consecutive months, may be here to stay [see also Seven Surprising ETF Performance Comparisons].

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TVIX 6 Month Performance Chart

In light of this data, today’s ETF to watch will be the Daily 2x VIX Short-Term ETN (TVIX). This fund is one of the more popular trading tools in the market, as it offers a 2X leverage on VIX volatility contracts. As such, it is not uncommon to watch this fund jump as much as 10% in either direction during active trading sessions. If claims come in higher than predicted, TVIX may stand to gain a fair amount, but a strong report has the potential to slaughter this fund on the day [see also The Top 10 Cheapest And Most Expensive ETFs].

Disclosure: No positions at time of writing.

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