Second quarter earnings season started this past week with the bulk of reports coming next week. So far the S&P 500 seems to be positive on earnings season (or something else) as the index rose almost 3% for the week ending July 12th. This was actually the best week for the S&P 500 since rebounding from Fiscal Cliff fears at the beginning of 2013.
Despite the S&P 500 at all-time highs, VIX is not making new lows. This divergence (seen in the chart below) always peaks the curiosity of market observers so keep an eye out for commentary that will persist unless VIX breaks 11.30. 11.30 was the lowest closing price for VIX this year on March 14th (and 15th) with the S&P 500 closing at 1563.23. To make things easy I circled that day on the chart below. Friday the S&P 500 closed at 1680.19, about 7.5% higher. On Friday VIX closed at 13.84 or just over 18% higher than this year’s low. I am aware VIX is already trading at a low level, but 2.54 points higher than March says there is definitely more concern now than there was then about lower market levels.
VXX and the other long VIX ETNs suffered from lower volatility associated with high stock prices last week. At least one trader sees lower levels for VXX in the next couple of months. optionMonster noted mid-week that there was a buyer of 24,000 of the VXX 16 Puts that expire 0n July 26th who also sold 12,000 of the VXX Sep 28 Calls. We’ll definitely take a look VXX on the 26th to see how this works out.