The NASDAQ-100 (NDX) has been underperforming the S&P 500 (SPX) for most of 2014, but did play some catch up last week. The SPX rose 1.21% while NDX was 2.51% higher. The result of bullishness in the equity markets was pressure on equity market volatility. The CBOE NASDAQ-100 Volatility Index (VXN) dropped 11.80% on a week over week basis to close at 13.45. This is the lowest close for VXN in 2014.
The leader of last year was the Russell 2000 (RUT) and the domestic small cap focused index has been the laggard of 2014. There was some catch up this past week with the RUT up 2.11%. However, for the year RUT is still down over 3% while the S&P 500 is up close to 3%. The strong RUT performance put pressure on RVX which finished the week at 17.69.
With low volatility comes contango and that’s what we have for both the VXN and RVX term structure curves. This is understandable with respect to VXN. If RVX stood alone without VXN or VIX lurking around for comparison I think we may see a higher level in RVX based on the performance of RUT this year.