Tuesday’s ETF To Watch: S&P 500 VIX Short-Term Futures ETN (VXX)

by on March 27, 2012 | ETFs Mentioned:

As we kick off the final week of March, investors will have to dig for significant market-moving events in the coming trading days. Though the month has been packed with significant economic data, this week will be relatively slow save for a few U.S. reports. Fed Chairman Ben Bernanke spoke on Monday, commenting on the current economy and how we should expect to fare over the next few months. Bernanke noted that we are in a bit of a pickle, as the dramatic uptick in employment has not been matched by economic gains of the same magnitude, which could spell trouble in coming months. Part of keeping the economy going will be key economic indicators over the next few weeks, including a major report today [see also Does GLD Really Hold Gold, Or is it a Scam?].

U.S. Consumer Confidence is slated to hit markets today with analysts predicting a slight decrease to 70.0 from the previous 70.8. This result comes as something of a surprise given that the same figure enjoyed a marked increase for the month of February. “Consumer sentiment has been helped by employment gains and improved performance in equity markets. However, recent increases in gasoline prices likely weighed on sentiment in March” writes FXstreet, citing reasons for today’s likely decrease.

With unemployment decreasing and job markets steadily improving, consumer confidence has been making its way back up to pre-recession levels, but we still have a long road ahead of us. Bernanke’s commentary yesterday suggests that things may get worse before they get better, as it seems like the general population has gotten a bit too excited with recent economic indicators. While we have been enjoying strong growth, it seems that we may be in for a small contractionary period before we can move forward. Today’s report will be a good indicator if we will be able to sustain our current bullishness, or if things may calm down in the coming days [see also ETF Laggards Struggling In 2012].

With this major announcement on tap, today’s ETF to watch will be the S&P 500 VIX Short-Term Futures ETN (VXX). This ETF tracks front-month VIX futures and has quickly become a trading icon. VXX is home to nearly $2 billion in assets and exchanges hands over 40 million times each day. It has made a name for itself as a strong speculative option for active investors to bet on markets and data reports. If today’s release comes up short, look for VXX to make big gains for the day, but a jump in consumer confidence could slaughter the ETF [see also ETFs For Rising Copper Prices].

Disclosure: No positions at time of writing.