The Dow Jones Just Broke Below its 200-Day Moving Average

Panic was out of control in October 2019.

Investors began to run for the exits, selling everything. In just three days, the Dow Jones lost 1,100 points thanks to ISM data pointing to slower growth. The private sector was seeing slower jobs growth. Fears of impeachment were making the rounds.

And then, markets got even more bad news.

Not only was President Trump imposing tariffs on EU goods, but we got a very disappointing services economy reading – pointing to even more decay and pain.  While the services sector did expand in September 2019, it did so slower than expected, according to the ISM Non-Manufacturing Index. In fact, it fell to 52.6, which is less than the expected 55.3. 

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Bottom line: Elevated uncertainty is threatening economic confidence after September’s stock market bounce ran out of steam,” said Willie Delwiche, investment strategist at Baird said, as quoted by CNBC. “The manufacturing sector continues to weaken. CEO confidence is at its lowest level in a decade and the pace of private sector job growth is slowing.”

That wasn’t the worst of it, though.

With all of the tension in the market, the Dow broke well below its 50-day and 200-day moving averages. From there, should the Dow fail to hold support at 25,500, it could test 24,325, and even fall another 2,500 points to test a low set back in January 2019.

As we’ve noted many times, one of the top go-to trades for investors has been volatility.

In fact, many use the following opportunities:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

As volatility ticks higher with the trade war, ETFs such as the UVXY could run even higher. The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. 

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The TVIX is another great way to trade elevated volatility. This ETF  tracks an index of futures contracts on the S&P 500 VIX Short-Term Futures Index. As volatility ticks higher, the TVIX ticks higher. 

iPath S&P 500 VIX Short-Term Futures (VXX)

As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return. In simple terms, as volatility shoots higher, so does the VXX.

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