VIX and SPY Show Positive Correlation For 4th Day In A Row

VIX Futures down slightly today, but remain largely unchanged at the close for 4 days now. The S&P pushed up to within a point of new all-time highs during the day but VIX futures diverged as can be observed in the intraday SPY arbitrage model.

With the VIX futures term structure mostly stationary the spread for the front two months remained at -0.85 making for a roll yield that isn't benefiting XIV much (this lack of movement has also resulted in a mostly stationary VXX Daily Forecast).

Spot VIX also diverged from its normal inverse correlation to the SPY again, making it 4 days in a row or positive correlation. I'd love to see someone run through the data on this to see when the last time was that this happened (typically positive SPY-VIX correlations are negative for the market in the following days).

VIX remains 5.6% below actual market volatility over the past 30 days (HV21 at 14.53) resulting in a continuation of a negative risk premium. While this is unusual it's not unheard of, especially after a recent spike in VIX like we saw in mid-April. If we get a few more low volatility days in the market HV21 will come down to about 13.75 by Thursday.

The daily SPY arbitrage model is still holding a pretty wide spread as well:

Given that the usual correlations seem to be temporarily broken and the contango spread is neutral it seems best to continue to wait it out a bit for a more profitable setup. Alternatively, if I owned XIV/SVXY I still think it's a good idea to pick up some cheap VXX calls as I mentioned via Twitter last Wednesday.


UPDATE
Performance of S&P 500 after 3 or more consecutive days of positive SPY-VIX correlation, from 3/2004 to present: