Stop Wasting Energy On The VIX [Dow Jones Industrial Average(INDEXDJX:.DJI)]

The VIX Can Be Helpful

Before you begin writing nasty emails or tweets about the usefulness of the VIX, our market model uses the VIX, which means we agree that it can be helpful. The other key point is time frames. Shorter-term traders may have found countless relevant ways to use the VIX. We are investors, meaning it is important for us to understand what the VIX can and cannot do on a longer-term time horizon relative to the stock market.

Stocks And Bonds March In Unison

Typically during periods of economic fear bonds and stocks move in opposite directions. However, they moved in lock-step during several periods over the past few years. Therefore, it is not safe to assume rising bond prices means (a) the economy is on the ropes, nor (b) stocks are on the verge of a major correction.

As noted on May 25, our last chess move was to increase our exposure to stocks. Since then, the S&P 500 has added 18 points. The bond exposure (TLT) we still have has also been kind to us this week. With the market anticipating a weak GDP report, TLT is still up 1.53% this week even factoring in Thursday’s session. We will continue with the “monitor and adjust” game plan rather than the more common “anticipate and hope” approach. For now, a portfolio of stocks and bonds with a heavier equity weight remains prudent.

This article is brought to you courtesy of Chris Ciovacco from Ciovacco Capital.

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