After closing above 20 on the 26th of July, the CBOE Volatility Index has closed above this mark since.  Only on July 27th, July 31st, and August 8th has the VIX even touched below 20 intraday.  Since August 8th, the VIX has remained entirely above this mark, with option premiums and volatility bouncing between primarily between 20 and 30.  The Volatility Index hit its peak on August 16th, touching 37.5 on runaway fears. 

    Though the VIX touched below 20 during Wednesday morning, afternoon jitters and an investor-focused statement from President Bush led volatility higher into close.  Between close and Thursday's open, data and sentiment swung in favor of the bears, with this trend continuing well into today's trading.

    Treasuries continue to strengthen, as even gold's 2% burst rally today has not matched the persistent strength seen in the 5- and 10-year bills.  The S&P likewise remains weak relative to fixed income today.

    Again though, the Russell continues to make up losses against the S&P.  This is somewhat perplexing, as a tightening credit market should affect smaller firms with less collateral and cash much more than large firms that can sustain growth out of pocket.  Some of the correction is likely due to the S&P's heavy financial weighting, as well as the already-overextended difference between the two over the last month.

    Though I'm short on time today, I wanted to get this out there, as there have been so many commentaries on the "return of the large caps" lately.  The gist of my argument is that the difference in return between large caps and small caps is strongly and negatively correlated to the VIX.  When the VIX is high, large caps perform at least as well as small caps, but when the systemic volatility is low, investors require a higher rate of return for the greater risk inherent in small cap securities. 

    I'll do formal difference time series analysis when I've got the time, but I think this graph is something of an indicator of validation.