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

by on February 29, 2012 | ETFs Mentioned:

Today is not only leap day, but it is also the last trading day of the month, and it is poised to be a big one. After enduring a relatively calm period last week, traders and investors will be champing at the bit for today’s session, which marks something of a perfect storm scenario. Today will see economic data from all around the world hit, with U.S. GDP, U.S. Consumption, German unemployment change, and Euro-zone CPI among others all slated to hit the market at some point during the day. With that in mind, this will likely be one of the most active days in recent memory [see also Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand].

Starting with the most significant report, U.S. GDP, analysts are predicting for last quarter’s figure of 2.8% to hold flat for today’s release. GDP is the overall gauge for the economy and is one of the most important economic indicators for any country. Here in the U.S., GDP has been establishing a healthy growth, though it is still not where a number of analysts would like to see it. If today’s report holds flat as expected or misses entirely, it may be a sign that our economy is screeching to a halt. But a strong report will likely push markets up and spark a nice buying trend for the session.

Moving on to the other data releases for the day, U.S. personal consumption estimates put that figure at 1.1%, the same as it was last quarter. German unemployment change is slated to jump from -34,000 last month, to -5,000 for the current month, which would mark a healthy jump for one of the strong economies in the euro zone. Finally, euro zone CPI core figures are predicted to enjoy a slight uptick to 1.7% versus last month’s reading of 1.6%. With all of these major data points hitting the market at some point today, it will be nearly impossible to predict the direction of today’s market, but a high trading volume is almost certain [see also ETF Insider: Will Economic Data Derail The Bull Train?].

With the potential for a volatile session across the board, today’s ETF to watch will be the┬áS&P 500 VIX Short-Term Futures ETN (VXX). This fund tracks front month VIX contracts and is one of the most popular speculative tools on the market, as it has an average daily volume of nearly 30 million over the trailing month. After going on a tear last year, VXX has come crashing back to earth, as it has lost nearly 30% on the year. Predicting the movement of today’s market will be near impossible, as any number of combinations of the aforementioned reports can send equities in either direction. VXX will be in focus as it can help traders hop in on the trend of the day for a potentially handsome return [see also Seven Surprising ETF Performance Comparisons].

Disclosure: No positions at time of writing.