VIX Front Month – Second Month Backwardation Streak Ends at 30 – So Now What???

For the first time in 2016 the front month VIX future closed at a discount to the second month.  This brings the recent streak of backwardation to an end at 30 days.  The table below shows the 10 longest first month versus second month backwardation streaks with the recent run coming in a solid fourth place.

Front Month Second Month Backwardation

So now what?  Anyone’s guess is as good as anyone else’s, but I did some quick historical analysis.  The table below shows the 30, 90, 125, and 250 trading day performance for the S&P 500 from the day that backwardation ended.  Note some of these time periods have not been completed since some of the streaks happened within the last year.

Post Streak

The results are mixed, with booms or busts follow this market anomaly.  As always time will tell, but if we start a new backwardation streak tomorrow that may be an indication that we are in story for more weakness in the stock market.