SPX near Highs, New Low on VIX, and VIX/VXV Ratio at 0.73

This page was published on the old Macroption blog on 19 August 2012 and may be outdated.

S&P500 1 Point below April High – What Next?

S&P500 Index (SPX) closed at 1418.16 on Friday, less than 1 point below its highest post-2009 close of 1419.04 made on 2 April 2012. During the last three years we have seen existing highs broken and higher highs made. The all time highs on S&P500 in the 1550-1577 area are not too far already. How much will the market struggle with the current resistance and will it break through eventually (and when)?

S&P500 index

New Low on VIX

After the VIX (CBOE Volatility Index) closed lowest since June 2007 on Monday it recovered a bit and traded between 14 and 15 for most of Tuesday, Wednesday, and Thursday. It was falling Friday mid-day and again into close, and it ended this week at a new post-2007 low of 13.45. For a reference, historical volatility in the last 21 trading days has been 13.20.

VIX (CBOE Volatility Index)

VIX Futures Curve

The big picture on VIX futures curve has been the same for most of 2012, only now the whole curve is several points lower than it was in the first quarter, when the middle and long end were trading near 30.

In the chart below you can see how the curve looks now compared to 24 July and 1 August, days of recent VIX highs.

VIX futures curve

Unlike VIX, VXV Index Is Not at the Very Low

Although the VXV index has traded well below 20 for most of August so far, unlike VIX it is still slightly above its 2012 lows and 2011 lows (lowest closes were just above 17; this Friday the VXV closed at 18.35).

VXV index
VXV index (2010-2012)

VIX/VXV Ratio Second Lowest at 0.73

With VIX at long-term low (13.45) and VXV not (18.35), the VIX/VXV ratio is at 0.73, the second lowest reading since CBOE started to publish the VXV index (historical data for VXV is available starting from December 2007 on CBOE website). The ratio was at its lowest on 16 March 2012 (ratio 0.71, VIX 14.47, VXV 20.37).

VIX/VXV ratio

Black = VIX, blue = VXV, green = VIX/VXV ratio; 2010-2012.

Have a question or feedback? Send me a message. It takes less than a minute.