Study: what happens when VIX spikes


VIX spiked more than 20% on Monday. That alone is not rare. What’s rare is that VIX spiked more than 20% while the S&P was above its 20 daily moving average.
Here are all the historical cases in which VIX spiked more than 20% while the S&P was above its 20 daily moving average.
*We ignore bear market cases. The Medium-Long Term Model states that we are in a bull market right now.

  1. January 29, 2019 (present case)
  2. September 5, 2017
  3. December 31, 2014
  4. October 31, 2011
  5. February 22, 2011
  6. November 27, 2009

*Note that this signal did not come out during the 1990s or 2000s. Most VIX spikes happen after the S&P 500 has fallen below its 20 daily moving average.

September 5, 2017

The S&P has yet to make a 6%+ “small correction”.

December 31, 2014

The next “significant correction” began almost 5 months later in May 2015.

October 31, 2011

This signal came out when the S&P began a 10.3% “small correction”. This historical case does not apply to today. At the time, the S&P did not even make a new-all time high yet. The S&P has made a new all-time high recently.

February 22, 2011

This signal came out at the bottom of a 7% “small correction”.

November 27, 2009

This signal came out after the S&P made a “small correction”. The next 9.2% “small correction” began almost 2 months later in January 2010.

Conclusion

Historically, this has been a bullish sign for the U.S. stock market. This indicator implies that the next small correction is at least 1.5 months away.

2 comments add yours

  1. 1.5 months away in a sideways range? Do u think we reach a new high before or just sideways consolidation?

    • Not sure about an exact new all-time high. But overall, I think a range is more likely. The short term is ridiculously hard to predict, which is why I don’t try.

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