It took five days for the S&P 500 to drop from 1865 to 1815 – this past week the S&P 500 rose from 1815 to 1864 in just four days. This time last week those of us that comment on the market action each weekend were posting articles and blogs citing the S&P 500 experiencing the worst weekly performance since May 2012. Well this week we have to search for the last week where the S&P 500 rose over 2.71% (last week’s performance). To save everyone time is was July 2013. Just seven days ago everyone was calling for lower equity prices and then end of the stock market run. Now there is some real silence as this market continues to defy the skeptics also known these days as a permabear.
The four volatility indexes that are based on S&P 500 Index (SPX) option trading dipped last week as the stock market moved to higher levels. Also, keep in mind that three day weekends have a dampening effect on the performance of VXST and VIX. Even if we were facing a two day weekend the shift would probably have been pretty dramatic.
In the exchange traded product space the short volatility strategy funds had a banner week as they are prone to do when VIX drops quickly. The May VIX future went out on Friday at 15.60 which was over a two point premium to VIX. This is partially due to the long weekend, but there is still a big divide between VIX and the May and June future contracts. Even a lackadaisical stock market would probably impact the VIX exchange traded products with a drag on the long fund’s performance and a boost to the short funds.