This Week in Russell 2000 and Nasdaq-100 Volatility – 3/28/2014

Last week the S&P 500 lost about half a percent while the Nasdaq-100 and Russell 2000 got hit pretty hard.  The Nasdaq-100 was off about 2 ¼% and the Russell 2000 was down by just over 3 ½%.  Both VXN and RVX rose last week gaining over 4% and over 8% respectively.  Ever since the CBOE Futures Exchange launched futures contracts on both VXN and RVX I have kept a close eye on the spread between both VIX and VXN and VIX and RVX.   This past week with VXN and RVX moving up so much and VIX dropping I decided to take a look at the front month futures contract spread, specifically the spread as determined by the April RVX contract minus the April RVXI futures.  The chart appears below –


The bottom (purple) line is the important one.  It shows the spread as determined by subtracting VXJ4 (Apr VIX) from VUJ4 (Apr RVX) since the first day of trading for VUJ4.  On Friday that spread was at 6 points which is the highest is has been over the history of VUJ4.  Not only is heightened risk in domestic stocks relative to global stocks showing up in the indexes, but it is also showing up in the futures contracts as well.