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Why $VIX?

Summary

Current market position.

inputs and possible outcomes.

my market prediction.

So far we are having a robust year ($SPX has gone up by 24% since the January second) even though the president's couple announcements regarding "Trade war", which had pushed the market to the over five percent corrections twice (May first and August first).

However, 2019's all this market uptrend was able to do because of the 2018 fourth quarter's market correction.

And now Oct 2019 has been a wind changing month, so far we encountered, one, the U.S. vs. China trade war meeting, second, not so bad 3rd Quarter Earnings, and upcoming FOMC meeting - high chance to cut the interest rate.

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2019 has been one of the best years for the GOLD since 2012, and the yellow metal most likely to carry on its growth pace next year. All these economic uncertainties cornering the investors to use gold as a secure investment. 

Based on the $GC daily chart, we can see the price movement has reached the end of the current trend. Means the $GC will either go up or down, and I believe, it may do the pit stop at $1450 price zone.  Because of the upcoming news, which I mentioned here, may move the market to the short term bull trend. In that case, the some investors and the speculators could trade the gold price down.

Though I do not think this uptrend would continue more than a couple of months. First of all, excluding the U.S., the majority of countries' economic metrics have been showing slow down or declining in the last few quarters. In the long-run market follows the macroeconomy. 

/German vs G7: Quarterly GDP/ Total, Percentage change, previous period, Q1 2010 - Q3 2019 

/China: Quarterly GDP/ Total, Percentage change, previous period, Q1 2010 - Q3 2019

The second raising problem is the $SPX companies' Y-to-Y EPS growth has been decreasing and non-financial corporate debt levels have been increasing yellow flag (especially some Eurozone countries and China, which has a non-finance debt to GDP ratio of 157%).

Chart by @charliebilello

1. Global Bond Market Outstanding  2009 vs. 2018

2.  Global Equity Market Capitalization 2009 vs. 2018

On top of it, the last one and half year's "Trump's Trade War" with China pushing its limit. I personally believe that "corp debt" could be a next housing bubble though the Chinese government has already trying to delay the possible outcome by decreasing banks' overnight rate and letting the foreign banks have broader access to the market. These things may look it is working for now, but it may just spread the disease to other countries as well. The third big concern is the possibility of the president's impeachment, not only the democrats but also some republicans may want to peruse it. If it happens, of course, the market will not react nicely.

So I  think $VIX could be a better investment than the gold or S&P500 index for a midterm. Also, I don't think $VIX will keep 11 to 14 rage that long (some statistics of $VIX). In conclusion, I believe $VIX tracking $VXX or $UVXY could be a quite good midterm investment or hedge to protect your current investment portfolio.

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$VIX historical statistic 

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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in UVXY over the next 72 hours.