The Russell 2000 continues to lag the S&P 500 in 2014 after dropping almost 2% last week while the SPX was just slightly lower. 2013 was a great year for small cap and domestically focused companies with the RUT gaining almost 10% more than the S&P 500. Like many things in the financial markets the outperformance in 2013 is resulting in underperformance in 2014. RVX was trending up before a big drop on Friday resulted in the spread between RVX and VIX narrowing to about 6 ½ points from around 8 points which has been the high end of the spread between these two volatility indexes.
VXN has fallen back into tracking closely with what is going on in VIX. My anecdotal thought on this has been that earnings season may have a small influence on VXN on a quarterly basis as large components. The NASDAQ-100 was down about 1% on the week, but since the price action was pretty tame from day to day the result was a lower VXN as well with a drop of 3%.
Both the VXN and RVX curves are now showing a bit of contango but the paths to get to this point differed a bit. VXN was lower and the futures dropped in a pretty normal fashion last week. RVX dropped about 2.5%, the May contract dropped as well, but the farther three months were all slightly higher. The result is a textbook contango shape since the curve was slightly flat the week before.