The CBOE Nasdaq-100 Volatility Index (VXN – 15.25) followed the lead of VIX this past week and dropped to begin the week and ended the week lower. The little scare we got on Thursday did not seem to have as much of an impact on VXN as it did on RVX or VIX. The Nasdaq-100 (NDX – 3587.20) did rise almost 1% while the S&P 500 was little changed on the week which resulted in VXN dropping over 7% while VIX lost about half the value that VXN did on the week.
The star of 2013 is now the red supergiant of 2014. For those of you that do not spend your free time watching the updated version of Cosmos a red supergiant is the first stage of a dying star. This geek reference is about the Russell 2000 which had a great 2013 relative to the S&P 500 and Nasdaq-100, but is giving back some of that lead in 2014. This seems to be the result of international and emerging markets experiencing growth that influences the performance of the SPX and NDX more than the RUT. Last week RVX barely dropped despite RUT being lower as well. Year to date the RUT is down about 5% while the NDX is close to unchanged and the S&P 500 is up about 2.6%. The result of this underperformance in RUT has been an elevated level for RVX relative to the two volatility indexes based on broad based US stock indexes. That spread remained wide as RVX ended up the week down about a half a percent.
The curves are steep and showing contango that is associated with normal market conditions. RVX being at a premium to VIX and VXN is carrying over to the respective futures markets as well.