When VIX and SPX Rise Together

Being preoccupied with some other work obligations this week I missed an unusual VIX related occurrence.  Apparently SPX and VIX both finished the day higher on Wednesday and Thursday.  As with everything that appears unusual I got to digging into the numbers.  My expectation was that if VIX moved up on a day that the S&P 500 was also higher for two consecutive days this may be taken as a forbearer of a drop in the stock market.  Stated another way, if VIX is moving up then there is nervousness around despite the stock market moving up.   After running numbers it appears I was sort of right…

CBOE has VIX data going back to 1990.  This gave me 5,876 days of VIX and S&P 500 trading days to compare.  Over that time period VIX and the S&P 500 moved higher together for two consecutive days 82 times (not including this week).  This is 1.4% of the time.  I honestly expected a much lower number.  Call me goofy, but I love when the numbers surprise me and this was not the only outcome that I was not expecting.  I then took those 82 instances of this rarity and checked out what the S&P 500 did over the next 1 to 5 days.  The results appear in the table below.

VIX SPX Higher Table

So the top row shows how often the S&P 500 was lower the day after this S&P 500 and VIX two up day occurrence.  Each row after that shows how often the S&P 500 dropped over the respective number of days.  I was surprised to see that the odds are pretty much 50-50 after the both VIX and the S&P 500 have moved up.  That’s where I was wrong.  I would have guessed around 70%.

The last two columns represent the sum of S&P 500 performance in points over each time period along with the average performance for each of these anomalies.  Although the number of higher or lower days is around 50%, it appears the market drops outweigh the moves higher.  I guess the result from all this work is a rare indicator that is slightly bearish.

If you have any ideas on how to slice and dice the data a bit more post a comment here or shoot me an email – rhoads@cboe.com.  If it leads to a follow up blog then some CBOE swag may be in your future.

  • http://twitter.com/awad_ziad Ziad Awad

    Hi Russel, great analysis. Obviously wondering if you have run the same on when $ spx and $ vix rise together for 3 days in a row ?

    • http://www.cboe.com/ Russell Rhoads, CFA

      I put the three day thing in my ‘to do’ notebook! Nice idea Ziad!

  • OrionsTurtle

    You may find that the VIX will not always act as a “fear” index, but will coorelate with the market when the IV in the calls gets inflated. You will see this as the new VIX norm in the future as we go into hyper inflation and stock prices spike higher. This will be a new paradigm not yet experienced in the history of the VIX.