Daily ETF Roundup: GDX Jumps, VXX Falters Despite Weak Equities

by on March 20, 2012 | ETFs Mentioned:

Equities started off the day in the hole, but were able to climb higher through out the session. The weak day came from less-than encouraging data from the U.S. housing sector, as housing starts dropped but are still up on a year over year basis. “This has been a very unusual winter. From December through February, the government estimates there were 137,300 units started, up 26 percent from the comparable period last year” writes Floyd Norris. Norris notes that the warmer-than average winter may be inflating housing starts on the year and a drop in spring figures may be ahead.

Markets were able to move higher after a tough start, but the Dow and S&P both lost a respective 0.5% and 0.3%. After posting a number of winning weeks, investors are hoping major benchmarks can continue their upward trend through out the remainder of the week. Commodities were a big story on the day, as gold lost 1% of its underlying price and crude oil lobbed off 2.2% of its triple digit standing. In an effort to keep our investors more educated on today’s fast paced financial world, we outline two of the most notable ETF movers for Tuesday’s session [see also Why No Investor Should Own GLD].

One of the biggest ETF winners on the day was the Market Vectors TR Gold Miners (GDX), which gained roughly 0.5% on the day despite the losses in gold. For many, this movement seems perplexing, as one would expect a gold mining fund to fall if its underlying asset takes a nose dive. But miners do not always move in tandem with their respective commodity, and today’s performance from GDX is simply another reminder of this phenomenon. Despite making gains for the day, GDX is still down roughly 3% for the year [see also Three Reasons Why Gold Is Overvalued].

One of the biggest ETF losers on the day was the infamous S&P 500 VIX Short-Term Futures ETN (VXX) which suffered a crushing loss of 4.6% as the VIX lost ground. What is most peculiar about this performance is the fact that equities also struggled today. Generally, when equities struggle, volatility surges, allowing VXX to prey on weak markets. But due to the nuances of this fund, it can still lose money even when equities have a bad day, which can make it a particularly dangerous trading tool. Adding insult to injury, today’s performance puts VXX down over 48% in 2012 alone, as volatility has been cooling off for several months now [see also ETFs To Bet Against Apple].

Disclosure: No positions at time of writing.