The VXX exchange-traded note (ETN) isn't for everyone, but might be watched carefully by those who understand the volatility of volatility

There's an exchange-traded note (ETN - similar to, but different from ETF's) called "VXX" (VXX) which basically tracks the well-known volatility index (VIX). Readers here know that I'd been thinking the VIX was carving out a low at $24.78, and there was a whipsaw action in VIX that corresponded with the one in equities markets. Inversely, of course, as the VIX snapped relatively higher, and then swooned again to definitely dig under my 24.78 number. While we cannot guarantee that the VIX makes a lasting low in this area, it's certainly worth continuing to watch. At this point, a close above the prior day's high might turn into a trigger buy for those who want to "buy volatility." Notice that it's certainly possible for the VIX and VXX to keep digging lower first - so don't assume that a trigger day must show up tomorrow, for example. For that matter, VIX futures expire on Tuesday, and perhaps the VIX and VXX may have some fluctuations over the next 2 days related to that.

It's worth remembering that the volatility indices do not necessarily move in lock-step, inversely to the equities markets. Also, when you step back and look at the longer-term charts of the VIX, you realize that it tends to be bounded more than equities markets. So even if the VIX and VXX rise, they are not necessarily going to do so in a way similar to how a company stock, or a stock sector or equities index, can trend for a long time. The huge rise during 2008 isn't necessarily going to see a repeat performance. Similarly, the extended slope down that we've seen since March may not get a repeat performance either. So, if you already are, or might be thinking about buying or trading VXX, you should probably not be thinking of it as a long-term position. It's just as possible that the VIX, and VXX, may experience a certain amount of "chop" that makes more money for nimble traders who can move in and out with shorter-term time horizons. That's why I made the remark in the title of this post - about "the volatililty of volatility"! VIX is basically "mean-reverting" meaning that in any given time frame, it tends to revert to its mean. This is a major reason why I consider it to be NOT subject to Elliott Wave counting, as such. And the VIX doesn't always make new lows, when equities make new highs, and vice versa. I guess this is all a part of pointing out, it isn't suitable for all investors ... that's worth remembering.

I wonder if some, or many, did some capitulation selling as part of those huge volumes showing in the VXX last week, as you can see on the chart below! That could actually be an interesting contrarian indicator of its own. Of course, I made the remark when the VIX touched 24.80 that VIX at 24.80 was a buy, and it did snap up very nicely - before the swoon down again last week! So if I say that VIX at 24.78 is a buy, what happens - same whipsaw, or not? I think it's safe to say, wait until there's a day that closes above the prior day, AND closes above the VIX level of 24.78. If that doesn't make a low for the VIX, then it would be a game-changer for the volatility index and for VXX.