VIX Complex Is Creepy in Movement

Wes Craven's swan song might be the creep movement in VIX futures.  Usually, when the VIX spikes higher as enters a backwardation period we expect the futures curve to slowly get steeper and steeper as VIX cash moves higher.  One of the truely odd things in the VIX over the last two days has been the way this assumption has been thrown otu the window.  On Friday we watched as February moved in percentage terms more than September.  Today,  Oct and November moved almost as hard as September again.  Notably odd was Oct and Nov moving at the hip.

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Is it Time to Go Long...NO

Yesterday I discussed a few indicators that I look at that express market panic.  They were also featured on CNBC's Mad Money.  Today I want to explain another indcator to look at:  VIX Futures.  As many of you know when the VIX futures are backward, the market has a negative expectancy (its going to go down).  Just how much of a difference does it make?  Take a look at this chart.  One is the SPX,  the other is the SPX if one goes to cash the day after Futures go backward between m1 and m2.

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Think It's Time to Go Long?

The answer is no.  The table below shows 6 things:

1.  Points gains in the SPX has done since July 2002

2.  Points gained in the SPX has done, when in cash when VIX is 5 points over VXV

3.  Points gained in  the SPX has done when in cash when VIX is 5 points over VXV OR VIX is over 40 points.

The second set shows the above, only stopping at the end of 2012.  I did this to take the latest bull market out of the equation (notably 2013) as we have gone through one of the longest straight up markets in history.

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Our Founder on Bloomberg Talking $VIX and $VIX Futures