After appearing to be headed to much lower levels, the US stock market got bailed out by the Employment Report on Friday. The result was lower VIX and VXN readings for a week where it appeared volatility was ready to rise in sync with the temperatures this summer. The S&P 500 ended the week up 0.78% and NASDAQ-100 was up 0.31%.
VIX was down 7% for the week with front month futures dropping slightly on the week. Note the red line showing the curve from 5/31/2013 – the index was at a premium to the front month and was at a premium to the June future for most of the week. I was visiting clients in another country this week and one question I received a few times was what the VIX market appears to be saying about the S&P 500’s chances of continuing higher. I pointed out that the June future was at a discount and this led me to believe that many market participants were expecting the S&P 500 to be steady or maybe work higher. I always try to emphasize if you are using VIX to get an idea about what the attitude of the market is you should check the futures versus the index. A nice textbook example was the price action this week.