The VIX is in the news again this time because it has stopped negatively coorelating iwth the S&P 500. While this is true, especially in the futures, I would argue that has more to do with the complete collapse of movement in the SPX. For a week the SPX drops a little, in tiny increments, and VIX falls. Now we have the VIX rallying and futures rallying even as the SPX is up. I would argue a couple of things:
1. We are off a long weekend coming from a period of time where the SPX barely moved.
2. SPX is finally starting to wake up, even if its a rally
The SPX has now been mostly flat this week, after being mostly flat last week. VIX has cause a small bid (if you want to call it that) to get itself back near 11.5%. VVIX though has had a really nice rally the last week or so.
VIX settled at 11.07 today, near the low for the last year. The VVIX which is the VIX of VIX settled below 80%. A combo that points toward options premiums being cheapin VIX at the same time VIX is low. Even the spread between the VIX cash and the VIX future (the true underlying for VIX options) is not exceptionally wide given how low VIX is currently. The Feb future settled 13 dollars and the Mark future settled about 14.40 spreads of less than 2 bucks and less than 3.5 dollars respectively.
While the market was off today, and VVIX was actually off a touch as well, there is a pattern developing in VVIX that is none too bullish the stock market. Check out a chart of VVIX since it bottomed last week.