The emerging market space continued to hold up relative to the US markets last week with the iShares MSCI Emerging Markets ETF (EEM – 41.62) gaining 0.01 on a week over week basis. EEM gapped lower on Monday and then moved progressively higher mid-week before giving the performance back on Friday. VXEEM did exactly opposite with a move higher on the open Monday followed by a progressive move lower over the course of the week.
Despite being tortured as a child through playing soccer for several years I still have a strong interest in the Brazilian market. It ranks up there with gold as the market that surprises me the most when it comes to the expected volatility as indicated by VXEWZ. The iShares MSCI Brazil Capped ETF (EWZ – 48.54) put up a small gain continuing to defy skeptics that told us to avoid the Brazilian market in 2014. With the gain in EWZ VXEWZ worked lower, but is still somewhat elevated relative to the other tradable volatility indexes quoted at CBOE.
The VXEEM and VXEWZ curves have not consistently been in contango over the past few months with periodic volatility spikes pushing the curves to appear more flat or even going into backwardation. Over the past two weeks we have witnessed pretty consistent contango from both curves which can be interpreted as the volatility market pointing to smooth sailing in the near term.