VIX ETFs crashed and burned into the end of Q1 and beginning of Q2, despite an improved VIX Index

Investors did not feel fear today heading into Q2 2012, as Q1 2012 had plenty to offer in terms of profits and bull markets.  Oddly enough, the VIX index rose .13%, which means that the VIX ETFs did not track well to the VIX index today.  Either way, investors appear to be anticipating the start of Q2 with hopes that second quarter will be as fearless as the first.

VIX ETF Update:

Volatility Index – New Methodology (VIX): +.13% 

iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX): -2.67%%, This ETN is designed to track volatility in the markets as measured by the Chicago Board Options Exchange Market Volatility Index (CBOE Index), a popular measure of the implied volatility of S&P 500 index options.  The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.  The iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) prices itself off of the average and implied volatility of the first two months of futures contracts of the S&P 500 Index.

VelocityShares Daily 2X VIX Short-Term ETN (NYSEARCA:TVIX): -1.11%, This ETN is designed to track 2X return on volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index.  The S&P 500 VIX Short-Term Futures Index measures the volatility of the S&P 500 Index via futures contracts as traded on the CBOE.  The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.

iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ): -.94%, This ETN is designed to track volatility in the markets as measured by the CBOE Volatility Index futures contracts.  The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.  The iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ) is priced from the average volatility of the 4^th through 7^th month futures contracts of the S&P 500 Index as traded on the CBOE.

S&P 500 Dynamic VIX ETF (NYSEARCA:XVZ): +.07%, This ETN is designed to track volatility in the markets as measured by the S&P 500 Dynamic VIX Futures Total Return Index.  The S&P 500 Dynamic VIX Futures Total Return Index seeks to combine results of volatility of the S&P 500VIX Short-Term Futures Index Excess Return and the S&P 500 VIX Mid-Term Futures Index Excess Return to create an accurate market volatility reading, as measured by the CBOE.  The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.

Velocity Shares Daily Inverse VIX Short-Term ETN (NYSEARCA:XIV): +2.41%, This ETN is designed to inversely track the volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index.  The S&P 500 VIX Short-Term Futures Index measures the volatility of the S&P 500 Index via futures contracts traded on the CBOE.  The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.

Bottom Line: VIX ETFs crashed today as there was apparently no fear despite relatively positive US economic reports and a possible Q1 correction heading into Q2.  If anything, investors were pleased that Europe increased their anti-debt firewall for Spain, along with being hopeful for a just-as-good Q2.

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Disclaimer: Wall Street Sector Selector trades a wide variety of ETFs and positions can change at any time.

About John Nyaradi (http://www.wallstreetsectorselector.com) John Nyaradi is Publisher of Wall Street Sector Selector: Your Home For ETF Investing! John writes a weekly guest column, John Nyaradi’s ETF Edge for MarketWatch.com and his investment articles have appeared in many online publications including Trading Markets, Money Show, Yahoo Finance, Investors Insight, Fidelity, ETF Daily News, iStock Analyst , among many others. His book, Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFs, is published by John Wiley and Sons and included among the Years Top Investment Books in the 2011 Stock Trader’s Almanac.