The market is at a tipping point.
If stocks are down 1% or more today, it could be the beginning of a scary decline.
I won’t try to predict if the decline will be weeks or months in duration.
And I’m not going to predict how big the decline will be, but…
If it starts to accelerate today, then this is how I’ll look to profit from it.
The S&P Volatility Index is a measure of expected future market volatility.
As a result, when markets decline this measure rises.
You can trade this measure with and S&P 500 VIX ETF (VXX).
If you treat the chart the same way you look at a stock chart, it’s easy.
Remember that VXX will go up when stocks (SPY) goes down.
However, the relationship is not direct, and the VXX can be more volatile.
Additionally, the VXX will decline in value over time, so you only want to trade the VXX for a short-term trade when you believe the market will have a sharp decline.
The setup right now is to buy the VXX if it trades over $30 and place a stop under $27.50.
If the market has a 2% down day, the VXX could shoot up to $33. I’d take some profits at $33 and then put a no loss stop on the trade.
If the market goes into a serious decline over weeks, VXX could hit $40 quickly.
That’s a potential 30% gain without using options in a short amount of time!
Remember this is a volatile short-term trade.
Rick Nartarian, Chief Investment Officer
The American Investor Daily