Bear Market

The stock market is now in a bear market downtrend. Several reasons can be given for this from both charts and fundamentals. The S&P 500 is having lower lows and lower highs. ERX, the triple bull oil ETF previously had a trading range between 39 and 48, but it has now broken down to the $31 area.

The FOMC is also out of bullets to fight unemployment and boost the economy. Our current situation is very similar to Japan's economy where their stock market has not recovered in 30 years in spite of low interest rates. The government cannot raise money to create jobs because the Republicans will not allow it. The IRS will have a constant shortfall in funds until millions of the unemployed are put back to work. Then, to add more grief, China manufacturing is down and Greece has not yet been fully delivered from its financial problems.

What can we do to make money in this environment? You can make big bets on more volatility. The VIX is now more than 40 and climbing. The VXX volatility index ETF is over 50 and TVIX is around 90 and steadily climbing. I think VIX will ultimately make it to 80 just like it did in 2008 when financial problems were great and a recession was coming. Now is the time to buy TVIX, the double VIX ETF. If VIX goes to 80, TVIX will go to 160. That will be a 77% gain from the current TVIX price of around $90. Even if TVIX does not get to 160, it will surely be a double-digit gain from here while the rest of the stock market tanks. Please do your own research before buying or selling.