Jun 29, 2016
Written by:
Al Hill
Traders, I noticed an interesting correlation between the UVXY and the price movements in the S&P 500. Too often, traders are day trading UVXY as a proxy to lever up on movements in the S&P. This can be detrimental to daytraders even when markets are highly volatile. It is important to understand when divergences are forming in the UVXY. These divergences gave me a basis for believing the market was due for a bounce of of Monday’s lows. On Monday, June 27th, the S&P 500 gapped lower and continued lower by 45 points intraday. At the same time, the UVXY was failing to take out its highs from Fridays large decline. Therefore, as price declined, volatility was declining also. This was our first warning that the decline was getting ready to reverse course.
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