Hi Steve,
Is it the quilting varigated thread you are using? There're so many types now, but the bees wax is your best bet if you are trying to use the general purpose varigated. I've never had a problem with my varigated quilting thread with C&C threads, except for tangling. I always forget to allow the needle and thread to "dangle" to unwind after every couple of inches.
I'm way to intense at times, huh?
Hugs,
Sharon