VIX-S&P 500 Correlation: Short-Term Top?

Aside from being a volatility indicator, we believe that the VIX index should fluctuate based on market moves and not necessarily on trading or technical patterns. Where it might be somewhat normal to see a stock bottom at its 200-day moving average, we would expect a more descriptive indicator such as the VIX to trade through moving averages as if they weren't there.

Since the July correction of last year that has not been the case. As shown below, the VIX has bounced off its 200-day moving average twice since last July, and each time it has rallied back to highs. (The pattern eerily resembles what technicians and chart readers call an "ascending triangle.") It has currently bottomed on the average.

This is not to say that declines are imminent, but it is worth pointing out that the two previous occurrences resulted in declines.

click to enlarge

Comments

[andrewpmk]

Coincidence?

[John Egan]

The only issue I see is that on the SP500 a trend line drawn off the top of mid December and continuing past the top of the beginning of March shows a bullish breach above that line with a retracement at the end of March and a move up the beginning of April ...(Depending on how you draw your trend lines of course..)

Still very interesting...

Thx jegan ;-)