It’s amazing what’s happened to this market.
One day, we’re up hundreds of points of points. The next, we’re down hundreds of points. And then repeat until traders start pulling their hair out. The problem right now is that no one is quite sure what’s happening with the economy.
News that some states would start reopening sent markets higher. Then, news that opening too soon could be a problem sent markets lower.
On top of that, the Federal Reserve is losing confidence in the economy. All after Federal Reserve Chairman Jerome Powell said the pace of the U.S. downturn is “without precedent” and cautioned a recovery could take longer than expected. He also said the U.S. may need additional support to pull the U.S. from the brink.
“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II,” Powell said, as quoted by The Wall Street Journal. “Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”
At the moment, markets are heading lower until there’s clarity on direction.
One of the best ways to prep for a potential pullback in the market is by trading volatility, which we’ve successfully done a few times with these three trades:
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
VelocityShares Daily 2x VIX Short-Term ETN (TVIX)
iPath S&P 500 VIX Short-Term Futures (VXX)