While US equity markets drift endlessly higher on sea of Trumptopian euphoria (and retail ETF ramps), European equity investors have hit the panic button this week.
In the last week, investors have been piling into European VIX futures – hedging for a potential catastrophic end to the market calm ahead of French and Dutch elections.
Historically, European 'VIX' has traded around 20% higher than US 'VIX' over the last 8 years. The current spike to an 80% premium is unprecedented.
The extreme differences between Europe's 'fear' and America's 'greed' is nowhere more evident than in this chart and suggests – for the contrarian who sees record short US VIX positioning – a Long US VIX, Short EU VIX position may be the play through the turmoil of the next month or two.
If we had to guess, we would say that move has begun in VIX (as VXX ETF shares outstanding have surged as VIX futures record net spec positioning unwinds)…