While the VIX fell, take a look at the actual VIX components:
VIX Volatility Index values generated at:Â Â 04/16/2013 15:14:59
| Trade Date | Expiration Date | VIX | Contract Month |
| 4/16/2013 3:14:59 PM | 13.99 | 1 | |
| 4/16/2013 3:14:59 PM | 14.64 | 2 | |
| 4/16/2013 3:14:59 PM | 15.11 | 3 | |
| 4/16/2013 3:14:59 PM | 16.18 | 4 | |
| 4/16/2013 3:14:59 PM | 17.50 | 5 | |
| 4/16/2013 3:14:59 PM | 17.82 | 6 | |
| 4/16/2013 3:14:59 PM | 18.46 | 7 | |
| 4/16/2013 3:14:59 PM | 19.45 | 8 | |
| 4/16/2013 3:14:59 PM | 20.78 | 9 | |
| 4/16/2013 3:14:59 PM | 23.37 | 10 |
This is not a chart of the futures, these are the actual volatility numbers for the corresponding months. The VIN, or near month is now May and the VIF, or far month is now June. The VIX is primarily May and a small negative bias is applied to June, as we are still ahead of April expiration. Thus the spot VIX is lower than both May and June vol. This is a quirk in the VIX that is intended to minimize the effects of expiration week.
The VXX is now holding all May futures, beginning today. So the key to understanding VXX performance will be watching the May future and the negative yield:
| VX K3-CF | S&P 500 VOLATILITY | May2013 | 16:38:10 | 14.75 | ||||
| VX M3-CF | S&P 500 VOLATILITY | June2013 | 16:38:09 | 15.70 |
When the VXX is holding primarily one month, it is much more susceptible to big movements. If we get a sell-off in the short term, it is more probable that the VXX can actually shoot higher. This may seem an alien concept to those who have been short the VXX for months now. Not saying that it will, just that it is more possible in the short-term.
Europe is still falling into a deeper recession. Â I could not believe this when I read it:
From the FT:
“German car sales fell 13 per cent in the first quarter, compounding the misery of Europeâs mass-market carmakers and threatening to end a three-year boom in premium car earnings.
New registrations in the European Union as a whole fell 10 per cent compared with the first three months of 2012, according to Acea industry association data.
Except for the UK, all leading European car markets reported double-digit percentage declines in the first quarter, including 12 per cent in Spain and 15 per cent in France. “
And from Bloomberg:
âThe market is getting worse day by day and, for the first time, I canât see the bottom,âFiat SpA (F)Â CEO Sergio Marchionne told reporters at the carmakerâs annual meeting on April 9. A decline in European sales âwould be worse than the forecasts we indicated in January as our base for 2013 targets.â
Wow. Target was the latest retailer to cut earnings estimates for the quarter. If you actually look at a lot of the large cap stocks that have run this year, you may be amazed at how their revenues and earnings have declined while their shares have risen substantially. JPM, WFC, INTC, YHOO, all had lower top-line numbers, and there will be many more.
A lot of headwinds to stocks out there. The Fed is what everyone believes will prop up the markets. Conventional wisdom in this case better be right. Stocks aren’t cheap, regardless of what you hear on CNBC.
