What is even going on? $SPX $VIX $VVIX

I tweeted this last night – SPX in blue, VIX in red and the VVIX in green.

Price velocity of the SPX has been rising while the VVIX and VIX have been falling over Q4 of 2016.

Here is one suggestion:

@DavidBelleFX I wonder if the VIX index is increasingly falling, because the VXX ETF is even falling, when the VIX had risen the last weeks.

— CryptoCryptics (@CryptoCryptics) February 5, 2017

@DavidBelleFX The VXX is falling, because of decay rates. The 2x VIX Short Term ETN (TVIX) had a monster 1-for-25 reverse split last year.

— CryptoCryptics (@CryptoCryptics) February 5, 2017

You’d have expected the VIX to rise due to an increase in the US base rate, which would cause volatility increases but this hasn’t happened. An introduction of the risk free rate should lead to a flight from higher risk assets to holding cash in an account (technically). This hasn’t happened.

What’s more is that the SKEW hit 6 year highs in January. This is the evaluative measure of tail end risk in out of the money options. Short term hedging ends up costing more, which prices a risk event short term. View the tweet from Chris Lemieux here:

Sentiment Trader:
SKEW – $VIX ratio nearing one of the highest levels in 27 yrs.

Almost always an indication of impending #volatility $SPX pic.twitter.com/oEc3Jhzwc1

— Christopher Lemieux (@Lemieux_26) February 5, 2017

I’m bored of saying that something is coming but it’s best to be aware of a few different events and when there is a feeling of complacency then there could be an issue.