Study: what happens when VIX's RSI spikes above 90


VIX soared today when the S&P fell more than 5%. VIX’s 9 daily CLOSE RSI is now 94, which is EXTREMELY high.

Here’s the historical study:

What happens to the S&P 500 when VIX’s 9 daily CLOSE RSI exceeds 90.

  1. February 5, 2018 (present case)
  2. August 24, 2015. This was the stock market’s exact bottom date.
  3. September 17, 2001. This was the stock market’s exact bottom date.

As you can see, this is about as high as VIX gets. Even during a bear market (2001), this almost marked the stock market’s bottom. It marked VIX’s exact top, even when the S&P fell a few more days.

August 24, 2015

This marked the exact bottom of the S&P’s 15% “significant correction”. The S&P retested this low in September 2015 and February 2016.
*Stockchart.com’s data is incorrect. The S&P actually fell to 1810 on September 24, 2015.

September 17, 2001

The S&P fell another 5 days before making a major rally in its 2000-2002 bear market. This historical case does not apply to today. The Medium-Long Term Model states that this is just a correction in a bull market.

Conclusion

The S&P might fall a little more, but the risk:reward profile is extremely bullish right now. NOW is the time to buy stocks and short VIX (medium-long term time frame).
On an important sidenote, these types of stock market crashes are sometimes (but not always) followed by retests. I.e. the stock market makes a big bounce or new high, followed by a retest of the crash’s low.
Here’s an example of a 1 day crash that retested and saw lower lows.

Here’s an example of a 1 day crash that did not see a retest or new low.

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