I’m as curious as you are about whether yesterday’s trampoline reversal in this vehicle has signaled an important top in the stock market. It would be logical to infer that if volatility is about to increase sharply, this would occur because stocks have begun falling just as sharply. However, only one of these conditions obtained on Thursday, when VXX soared more than 13% in a single session. The corresponding, 162-point decline in the Dow, while impressive, was hardly spectacular. That is not to say that the Dow couldn’t get into gear with a steep plunge to end the week. Whatever happens, it would appear that VXX has made a low of at least short- to intermediate-term importance. The fact that it did so without having quite reached a 25.43 bear-market target I’d flagged a while back suggests there is room for yet one more swoon to new lows — presumably accompanied by a stock-market rally to new record highs. For now, however, we’ll have to wait and see before we draw any conclusions about whether stocks have topped.
