VIX Futures are slightly higher vs. last Friday, after vol quickly compressed on the market rally. But compared to last Wednesday, our last VIX Futures post, the VIX is actually a bit lower. This week saw the price action respect the 1600 to 1650 range in the SPX, and for a move below 15 or above 20 in VIX, one side of that range likely has to break.
Here is last week’s snapshot from June 5th:
Compare that to today’s snapshot:
June VIX futures expiry on Wednesday before the open, so volume is increasingly shifting to July VIX futures as market participants become more interested in the market reaction to the FOMC next week. I am still on high alert for any instance when the front month VIX future moves above the next month VIX future, which will likely result in some more panicky covering in VIX-related ETFs, where many trades are based on the VIX Futures contango.
A break of 1600 in the SPX would likely be the catalyst for that contango to move into backwardation, though it might not last long. Every time the VIX has approached 20 in the past 18 months, it has quickly moved lower. That’s the key level to watch in VIX spot.