The negative sentiment in Europe seems to be shifting. Closing out the Greece issue, for now, has helped, but so did the data from Germany today.
Investor sentiment about economic prospects in Europe was buoyed after euro zone finance ministers gave final approval to a second bailout for Greece and data in Germany showed analyst and investor sentiment rose significantly more than expected in March.
Couple this with recent positive U.S. economic data and the reality is the global economic engine is picking up steam. Like a steam automotive, though, it takes time to get the full head, but it will come, and when it does, the train will go faster and faster.
- The National Federation of Independent Business said its optimism index increased to 94.3 last month – the highest reading since February 2011. It was the sixth consecutive month of gains.
- Retail sales recorded their largest gain in five months in February as Americans snapped up motor vehicles and bought a range of goods even as they paid more for gasoline.
- Small business confidence rose to a one year high in February as more owners reported plans to rebuild stocks after 56 months of inventory liquidation.
Now, to an interesting question from a reader …
What is your take on the TVIX as downside protection for any forthcoming major market pullbacks? I realize Credit Suisse has toyed with it recently … Would you use this vehicle or do you recommend a better one for downside risk management?
The thing about me when it comes to trading is that I am not fancy. I am either in or I am out of the market, and that choice depends on what I suspect will happen in the market. I don’t look for downside protection. Given that, I still have an opinion on the TVIX, an Exchange Trade Fund (ETF).
The TVIX is based on the CBOE Volatility Index (VIX), the gauge for overall market volatility. The TVIX tends to be even more volatile than the VIX. Consequently, it is a short-term trading vehicle, meaning one does not get in and wait. One has to be in and out, which means one has to be nimble, as well knowing what one is doing. As an illustration of this point, check out the chart below. It is a 3-month chart of TVIX compared to the VIX. Even though the VIX only contracted about 10% in the given time frame, the TVIX lost nearly 60% of its value.
My advice is if you are good at playing this game, go for it. If not, well then, think carefully …
Trade in the day – Invest in your life …
