VIX on the Rise Again [Chart]

VIX Hedge Plan [Charts] — IVolatility Trading Digest

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As anticipated Fridays nonfarm employment moved both fixed income and equity markets not because of fewer than expected job additions, but because of more than expected. The S&P 500 Index was already declining to retest the February 25 high at 2119.59 so the report seems to have increased anxiety about an early interest rate rise. It was like a skier on the down slope was pushed from behind by a sudden blast of cold arctic air and lost control.

After a brief market review, we report on the VIX hedge suggested in Digest Issue 9 VIX Hedge Plan [Charts] and offer another for long-term interest rates with ProShares UltraShort 20+ Year Treasury (TBT ).

S&P 500 Index (SPX ) 2071.26 after declining 29.78 points Friday, it not only blasted through support at 2100 but also declined below the December 29 high at 2093.55 and November support at 2075. Since the markets will anticipate any federal funds rate increase in advance, Fridays market response could have been the first warning. Confirmation could come as soon at March 18, after the next Federal Open Market Committee meeting scheduled for March 17-18. The first likely step would be the removal of patient in the remarks referring to when the key interest rate will rise. The next support to watch is 2050. After that it would be 2025, the upward sloping trendline from the October 15 low that could contain the decline. Finally, the three-point intermediate term upward sloping trendline from the November 16, 2012 low of 1343.55 now crosses at 1925.20, 146.06 points or another 7% lower.

CBOE Volatility Index (VIX ) 15.20, up 1.16 Friday and likely to rise further until after the next Federal Open Market Committee meeting scheduled for March 17-18 as the bulls and bears battle it out.

The table below shows the VIX cash compared to the next two futures contracts as well as our calculation of Larry McMillans day-weighted average between the first and second months.