VIX Futures are all up between 0.50 and 1 point over the past week as volatility picks up and we have cleanly broken a couple short-term support levels.
Here is last week’s snapshot:
- VIX Futures Snapshot 052913, Courtesy of Bloomberg
Compare that to today’s snapshot:
The key, key aspect of the VIX Futures curve that I am watching is the level of the June VIX Futures vs. the July VIX Futures. Currently, June is about 0.8 point below July. If June ever moves above July, then I think you could see a nasty short squeeze in the VXX ETF, which might cause a large bid for vol throughout the market (and some potential stock dislocation as well).
I discussed the increasing short interest on VXX over the last 2 months in my post on Monday. Despite a market that had been in a bull trend, VXX held up as implied vol didn’t move lower in the last leg of the move higher in the SPX. As the market started to move lower over the last week, we’ve seen a steady bid in VIX futures and related products. If the SPX does break 1600, I expect a significant acceleration in VIX higher.