Anomalous Behavior

Let’s not bury the lede. The volatility “complex” has been misbehaving recently. Quick review. When stocks go up (bullish) it is normal to see implied volatility (VIX) to go down and vice versa. Using the VIX futures and SVIX as a proxy for being short the futures, we expect SVIX to generally move in the same direction as SPX (stocks up and vol down = gain for short vol). As shown in the table below, the past few weeks has been off-script more than we would expect. I will report a more complete crunching of the historical numbers in the weekend post. But Jim! What does it mean? Let’s assume that this variation from the norm is statistically significant. My conclusion would be that this market can’t be trusted and we should be extra vigilant for more serious misbehavior. Please tell me what you think in the comments.

Meanwhile, the VIX Mix continued its climb yesterday tacking on an additional three points and pushing closer to full-on bull mode. 13 of 17 components are bullish and nine of the 13 sit above the 80% threshold.

That makes six green bars in a row and takes our trend measure up close to 70%.

Looks like full steam ahead except for that damn table at the top of the post. We’ll dig deeper over the weekend and you’ll be the first to see the results.

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