So Good....

Let’s start off with another look at the anomalous behavior that we pointed out yesterday. The week finished with another day showing SPX and VIX going the same direction (both down a touch) while SVIX (as proxy for VIX futures) closed higher. One more glitch in the matrix. We updated the data table and added a footnote that summarizes the historical data. Rounding the numbers, SPX and VIX go in opposite directions more than 60% of the time. We would also expect that VIX futures would move lower on positive days for SPX and we see that also more than 60% of the time using VX30 as a proxy for VIX futures. Maybe the recent behavior fits the definition of a random sequence in the overall distribution, but it still bugs me.

Nothing very noteworthy scanning our weekly recap. US equities up a little, vol measures down and an uptick in the VIX Mix.

Our composite gauge of signals from the volatility world tacked on one point to end the week just shy of the most bullish slice of the pie. 14 of 17 components are also bullish with eight north of the 80% border. Not a single bearish reading to be found.

That makes seven bullish days in a row with a look that supports the SPX move back to all-time highs.

Let’s now spend a minute on the VIX term structure. This is important so pay attention. 😉😉

The August VIX futures contract will expire on Wednesday morning and still has more than a point of premium to spot. More importantly, the front of the curve is very steep. Spreads from Aug to Sep and Oct are all above the 90th percentile of historical values. That represents potential juice for the short vol trade and the steepness says that vol traders are pretty sanguine.

We also have spot VIX finally putting in a new closing low for 2026. Investors are not expecting any big fireworks looking out thirty days.

Finally, the recent pulse of SPX realized volatility is fading along with spot VIX. The result is VX30 > VIX > RV21 - a configuration consistent with smooth sailing ahead.

Do all of these bullish signs serve to confirm your positive attitude? Maybe a little James Brown for you. But all the goodness might just feed your skepticism. Are things simply so good that they can only get worse from here? Times like these I like to think of all those cautious souls who are watching their hedges bleed out while they ponder whether to roll them one more time or simply throw in the towel and look for another window to reapply the protection. Nearly seven points of contango in the VIX futures term structure nearly screams to have a bear fall from the sky to flatten the curve. Very small odds of that happening but don’t ignore the possibility of a more stealthy assault on your portfolio.

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