The SPY Swings Wildly Following Hawkish Comments At Jackson Hole Symposium: This ETF Tracks Stock Market Volatility

The SPDR S&P 500 SPY was volatile Friday after Federal Reserve chair Jerome Powell’s opening remarks at the Jackson Hole Symposium indicated the central bank may continue to raise interest rates and hold them at a restrictive level until inflation falls to its 2% goal.

The volatile price action follows a bearish day on Thursday, which saw the market ETF drop about 1.4% on high volume, falling through a potential bear flag pattern on the daily chart.

The move caused volatility in the stock market to increase, with the ConvexityShares Daily 1.5x SPIKES Futures ETF SPKY spiking up almost 9% from its low-of-day.

SPKY is a 1.5x leveraged fund, which tracks the SPIKES Futures Short-Term Index and measures volatility in broad-based equities in a similar way to ProShares Ultra VIX Short Term Futures ETF UVXY, which tracks the movement of the S&P 500 VIX Short-Term Futures Index.

For every 1% daily movement in the SPIKES Futures Short-Term Index, the SPKY fund seeks to move 1.5%, meaning that it’s for short-term trades and should not be held for a long period of time.

On Friday, SPKY was trading slightly higher at one point, attempting to break up through a resistance level near the $5.60 mark but on low volume, which indicates consolidation.

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The SPKY Chart: Although SPKY negated its downtrend on Thursday by forming a higher low above $4.91, the price action on Friday may serve as a lower high, which may give investors pause. After the big bullish move in the ETF on Thursday, sideways consolidation may be needed prior to the ETF either confirming a new uptrend or continuing in a downtrend.

• Momentum in SPKY has been increasing, with its relative strength index (RSI) forming a series of higher lows. The rising momentum indicates traders have an increased interest in the ETF.
• When SPKY surged higher on Thursday and popped slightly higher again on Friday, the ETF rejected the 50-day simple moving average as resistance and fell back under the area. If the ETF can regain the 50-day SMA over the next few trading days, it will give traders bullish on volatility more confidence going forward.
• SPKY has resistance above at $5.59 and at $6.68 and support below at $4.97 and at $4.55.

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