Fear is creeping back into the markets.
All thanks to the threat of tariffs. Granted, “The market is mostly betting that tariffs will be lower than the numbers Trump threatened in April, but many major trading partners have yet to announce trade pacts with the U.S. If the tariffs do come to pass, it could threaten the stock market’s gains,” as noted by Barron’s.
We also have to consider that major indices are excessively overbought.
The Dow Jones, for example, is struggling at triple top resistance dating back to December. It’s also overbought on RSI, MACD and Williams’ %R.
All of which tells us the market is overdue for a healthy correction.
On top of all of that, there’s still a good deal of uncertainty in the Middle East, with Israel carrying out strikes against Houthi targets.
That being said, investors may want to hedge for volatility again, which we can do with:
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. The last time volatility exploded higher, the UVXY ETF ran from about $19.18 to a high of $53.21. That could happen again if trade war fears get out of hand.
iPath S&P 500 VIX Short-Term Futures (VXX)
The VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index. The last time volatility exploded higher, the VXX ETN ran from about $45 to a high of $91.19.
ProShares VIX Short-Term Futures ETF (VIXY)
ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration.
The last time volatility exploded higher, the VIXY ETF ran from about $44 to a high of $89.14.
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Written by Ian Cooper