There’s just too much fear in the markets.
At this point, the Dow could sink to lows we haven’t seen since 2016.
In fact, that’s where we’re heading if support at 18,000 fails to hold. For markets to stop falling, we need to see an end to COVID-19, which is now up to 350,000 infections globally. We also need to see some progress from Congress.
The Federal Reserve has tried to help.
Just this morning, the Federal Reserve announced limitless asset purchases to keep the markets functioning. The central bank will run in the “amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy,” added CNBC.
There’s also hope we can get some sort of relief from Congress.
Senate Minority Leader Chuck Schumer said disagreements over the bill could be overcome in the next 24 hours, as noted by CNBC. A spokesman for Schumer later added the senator and Treasury Secretary Steven Mnuchin had a “productive meeting.”
Unfortunately, the stimulus bill failed on Sunday after Democrats warned the measure did not do enough to help impacted workers and instead offered too much for company bailouts, says CNBC. House Speaker Nancy Pelosi signaled she was not on board with the current stimulus plan, saying: “From my standpoint, we’re apart.”
Until something substantial happens, we expect for volatility to shoot higher.
As we’ve noted before, some of the best ways to trade the fear is with the following.
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.
VelocityShares Daily 2x VIX Short-Term ETN (TVIX)
The TVIX is another great way to trade elevated volatility. This ETF tracks an index of futures contracts on the S&P 500VIX Short-Term Futures Index.
iPath S&P 500 VIX Short-Term Futures (VXX)
As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.