Can the XIV Reach an All-Time High as We Approach OPEX?


Michael Golembesky Image Michael Golembesky Analyst, ElliottWaveTrader

As long as this Ending Diagonal pattern remains, I will remain extremely cautious to trade XIV to the long side or volatility to the short side, says Mike Golembesky, an Elliott Wave analyst covering U.S. indexes, volatility instruments, and forex.

After striking a bottom on June 6 in what I had been counting as a smaller degree ending diagonal this week, the VelocityShares Daily Inverse VIX ST ETN (XIV) has continued to push higher, trading 12% higher from last week’s low into the close on July 13.

We are now once again within striking distance of seeing a new all-time high in both the XIV as well as the S&P 500 Index (SPX). This move up off of last week’s low in the XIV does fit well with the larger degree pattern that we are watching on the XIV as the preferred path is looking for another high over the June 27 high prior to making a larger degree top.

Along with both the July and August futures contracts, the spot VIX Index is also trading down significantly from last week’s intraday high of 13.07 closing yesterday back under the 10.00 level at 9.90.

The July VIX futures contract expires next week and as long as the SPX is able to hold over its shorter term support level and continue to grind higher, then we should see both July and August futures move lower into next week’s OPEX. This will then keep the pressure on the XIV to continue to follow through on its own shorter term bullish pattern giving it enough juice to potentially propel it back over that June 27 high.

In the article, I wrote last week I had focused on the larger degree pattern on the XIV.