The S&P 500 was up about 1% on the week which was an underperformance relative to emerging markets. The iShares MSCI Emerging Markets Index ETF (EEM – 40.73) rose exactly 2% on the week and the result of this bullish move in the index was a drop in implied volatility. This drop, as recorded by the VXEEM was over 4% to 22.91 which is the lowest VXEEM level since July of 2011.
The iShares MSCI Brazil Index ETF (EWZ – 55.49) was up 3.75% on the week. Remember, EWZ dropped over 20% just a couple of months ago from high to low based on fears of a slowing economy. EWZ is still down slightly on the year and this lingering bearishness has VXEWZ at an elevated level of 27.00. VXEWZ was down on the week by over 5%, but still is at a relatively high premium to other index related volatility indexes. Looking at the futures curve, September, October, and November futures held up pretty well relative to the index. These elevated levels may indicate the market has some doubts about the future direction of EWZ into the end of 2012.