The iPath S&P 500 Short-Term Futures ETN (VXX) is on pace for its biggest one-day percentage gain on record
Global
stocks are cratering today, after being blindsided by
Thursday's "Brexit" vote in the U.K. This uncertainty is reflected in the market's "fear gauge," with the CBOE Volatility Index (VIX) lingering near levels not seen since mid-February. Additionally, the
iPath S&P 500 Short-Term Futures ETN (VXX) -- which measures the front two-months VIX futures contracts -- has jumped 21.6% to 16.55, on track for its biggest one-day percentage rise since VXX began trading in January 2009.
In fact, according to Schaeffer's Senior Quantitative Analyst Rocky White, this is the third time this year the VXX has jumped 10% or more. The most recent occurrence was on
June 13, ahead of the highly anticipated June Federal Reserve meeting. One week after this pop -- following
the Fed's monetary policy decision -- the VXX had retreated 12.5%.
However, this subsequent short-term price action seems to be status quo for VXX following moves of 10% or more. In the 35 other times the exchange-traded note (ETN) has moved 10% or more in one session, it averaged a loss of 2.9% going out one week. Discounting the June 13 jump, this average loss widens to 5.1% when looking at the subsequent one-month period.
What's interesting is that while these average returns in the wake of a 10% or more move are more or less in line with VXX anytime returns, the standard deviation of the former is much greater than the latter across all time frames. In other words, this heightened volatility could continue in the near term.
Meanwhile, such big moves in the iPath S&P 500 Short-Term Futures ETN (VXX) could have bullish implications for the S&P 500 Index (SPX) in the near term. While the S&P is down 3% at last check, the benchmark has averaged strong gains across all near-term time frames following a VXX jump of 10% or more, compared to its anytime returns. Plus, the S&P has been positive more times in the wake of this signal, versus its anytime performance -- looking back to 2009.
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