Over the last 4 Wednesdays, here was the closing level of the SPX index vs. the current level:
Incredibly, as much as it feels like the market has been quite week, it’s almost unchanged in the past 3 weeks. In fact, it’s down less than 1.5% vs. last Wednesday’s close, though it feels 5% lower despite the strong rally over the last 2 days.
The big reason for that “feel” is the behavior of the market has dramatically changed. This is a much more volatile market than 3 weeks ago. Here is 10 day historical volatility in the SPX index since the start of 2012:
So we’re basically near the highs of the past year and a half, at a point where volatility turned lower each time. That high volatility is why the market has felt scarier than the actual change in the SPX index over the last 3 weeks indicates.
Here is last week’s snapshot from June 14th:
Compare that to today’s Snapshot:
VIX futures are all higher by 1 to 1.5 points across the board as that realized volatility has picked up. An important point as well is that VIX spot is much lower than July VIX because VIX spot is anticipating the July 4th holiday next week, while July VIX Futures are much less affected by that (since they expire 2 weeks after the holiday, at a level that will reflect VIX spot at that point).
I still think it’s crucial to watch July VIX vs. August VIX as VXX volume has been very high in the past 10 days. July VIX has remained below August VIX for the past week, even during bouts of panic, which has been a positive sign for risk. If July moves above August, then it likely gets more panicky.