For college basketball fans, March Madness is upon us this month. But for investors in many parts of the stock market, March’s “badness” is already a headline maker.
I stick to the daily chart of the CBOE Volatility Index ($VIX) because it can be very fast. Here is the week. Do you see what I see? It reached 30 for the first time since last April. But if it does rise, unlike the previous two times it has topped that level, investors will have won a good game of dodgeball.
This means that the resting market is officially broken. Now, that doesn’t mean the S&P 500 Index ($SPX), on which the VIX is based, is set to melt anytime soon. This means that the market is set for a very wide range of results from a few weeks ago. So, this sudden increase is more than just statistical means. This is a clear signal that the fear level has moved from a happy state to a high risk zone.
Historically, VIX readings above 30 indicate heightened uncertainty and extreme investor fear. In this environment, the market is no longer pricing in smooth sailing but preparing for potential supply chain disruptions and geopolitical flashpoints. While these spikes are often short-lived and can present upside buying opportunities for long-term investors, the current momentum suggests that the path will be defined by continued whiplash.
For those looking to capitalize on this movement, the exchange-traded fund (ETF) market offers two polar opposite instruments: the ProShares Ultra VIX Short-Term Futures ETF (UVXY) and the ProShares Short VIX Short-Term Futures ETF (SVXY).
UVXY is a weapon for those who believe the chaos is just beginning. By providing a 1.5x daily leverage exposure to short-term VIX futures, UVXY is designed to deliver broad returns during sudden market turbulence. When the S&P 500 falls, the VIX generally rises, and so does the UVXY. On Friday alone, as the VIX neared the 30 mark, UVXY rose more than 10% as traders scrambled for downside protection.
However, it is a very tactical tool. Its leveraged nature and the costs associated with rolling futures contracts mean it can quickly lose value if the market stabilizes even slightly. It is meant to burn short-term hedging rather than long-term holding.
