The Russell 2000 (RUT) had a strong week gaining over 2% which places RUT up just over 2% on the year as well. It has been well documented that the Russell 2000 is lagging other broad based market indexes in 2014 after being the champ in 2013. This has also translated into elevated relative implied volatility levels. Translated into English this means RVX has been high relative to VIX in 2014. RVX was under pressure last week (as was VIX) losing over 12%. However, Friday’s close of 15.84 was two volatility points higher than the low in 2013. Again, translated into layman’s terms RVX continues to signal the market believes there is more risk in small cap stocks than large cap stocks.
The NASDAQ-100 (NDX) was up by 0.72% last week and the result was about a 10% drop in VXN. VXN finished the week at 12.27 which was the lowest level since March of last year when VXN put in a closing low of 12.03 on March 15th.
The term structure curves are both fairly steep as July takes over as the front month. It could just be that the state of the world has the stock market on edge this summer and with the S&P 500 hitting all-time highs market participants are aware there is a long way to drop if a true correction comes along.