When the equity markets come under pressure due to a geopolitical or macro-economic event the result is nervousness about the unknown. This type of nervousness often results in pushing VIX up more dramatically than VXN or RVX. This past week was another example of this as VIX rose 26% while VXN was up 24% and RVX rose 17%.
Note above the spread between RVX and VIX is represented by the bottom purple line. The difference between the two was 4 points as of Friday. This compares with a recent range between 2 and 7. We are closer to the bottom end of that range, but have a way to go. The way I interpret this is if RVX is ‘too high’ relative to VIX then domestic risk concerns outweigh global while at the low end of the spread the market is more focused on global risk. The spread was close to 7 earlier this year which led me to thing the focus of the equity market in the US was mostly domestic, at 4 Russia vs. Ukraine seems to be weighing in on the fear radar of market participants, but there are still some domestic concerns out there as well.