Saturday, August 22, 2015

VIX Futures Curve In Backwardation, Indicative Of A Near Term Market Bounce?

With Friday's market sell off, the VIX curve went into steep backwardation at 4.56. VIX backwardation refers to the situation when the near-term VIX futures are more expensive than longer-term 3-month VIX futures (VXV). This is an indication traders expect volatility in the future to be lower than it is now. Historically, when this occurs, short term market rallies tend to result from this technical event. In addition to the VIX backwardation, I noted other overly bearish technical indicators in our post yesterday, Oversold Technical Indications, Market May Be Due For A Bounce. In total, these bearish sentiment levels are viewed as contrarian signals.

From The Blog of HORAN Capital Advisors

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