S&P And VIX Both Jump: Which One Will Blink First?

Tyler Durden's picture

Via Dana Lyons' Tumblr,

While the S&P 500 closed at another new high, the VIX also spiked, an unusual occurrence that may have negative implications in the intermediate-term.

Among the themes in the stock market of late are the inexorable drift higher in the major averages and the rock-bottom levels to which the VIX has dropped, and stayed. On Wednesday, the former persisted but, in a stunning fashion, the latter did an about-face. Specifically, while the S&P 500 rose a half of one percent to another all-time high, the VIX, a.k.a., the S&P 500 Volatility Index, actually jumped by more than 11%. If you think that sounds odd, you’re actually underestimating the situation.

This was the largest rise in the VIX on a day in which the S&P 500 gained as much as .5% in 20 years, and just the 8th time it ever gained so much on such days since the VIX’s inception in 1986. It was also just the 8th time ever that the VIX jumped by as much as 11% when the S&P 500 hit a 52-week high – and also the first time in 20 years.

We took a closer look at that last statistic pertaining to the VIX’s behavior at S&P 500 new highs to try to ascertain any potential edge in the market’s subsequent behavior. As 7 precedents, and none in the last 20 years, hardly helps in examining the meaning behind this development, we have loosened the parameters a bit. Specifically, we looked at all days on which the S&P 500 closed at a 52-week high and the VIX rose by more than 4%.

As it turns out, Wednesday’s occurrence makes the 19th such day since 1999.



From a glance at the chart, it may appear that many of the prior events occurred near short or intermediate-term tops. That observation would be correct. As such, the aggregate performance of the S&P 500 subsequent to the prior events was sub-par, particularly in the intermediate-term.


As the table shows, the median performance for the S&P 500 was negative from 1 day out to 3 months, with the 3-month figure actually being the weakest of all time frames. Returns were especially consistently negative in the intermediate-term time frames, with just 4 of the 18 events showing a positive 1-month return, and just 5 and 6 over 2 months and 3 months, respectively.

We will also mention that this odd dynamic occurred 37 times between 1986-1998. Why did we not include those occurrences? First, that earlier VIX regime behaved a little differently than in recent years. And we always place more weighting to occurrences in more recent periods. Additionally, and related, there was not much of a trend to the market’s behavior following those earlier events. The S&P 500′s returns were somewhat lackluster out several months, but not egregiously so.

What is the reason for this odd VIX behavior? We can’t say, nor are we typically interested in the “why”. Some have suggested it may be related to the expiration of VIX options. That may be the case, but history does not put asterisks next to historical data so we try not to rationalize things too much. Thus, taking this unusual circumstance at face value, we would have to say the odds favor the S&P 500 “blinking”, i.e., the VIX has the better forecasting record and better chance of being “right”.

That may be troublesome for stock investors over the next few weeks and months.

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LawsofPhysics's picture

pensions must be paid, all ya'll know the answer already.

Fizzy Head's picture

Bringing this over from the last thread, the problem here is if nobody blinks and they all stay on one side of the boat....

LawsofPhysics's picture

ALL stimulus is fungible and DEBT=MONEY!  In other words we now have an exponentially increasing amount (hundreds of trillions) of paper/digital claims on real assets.

good luck (the fucking boat capsized already).

gatorengineer's picture

Didnt know Vix was a real asset.  i thought it was a casino bet.....  And everyone knows who wins at casinos....

That 20T + ECB +BOJ is coming into the market leveraged now.... its coming out of its 7 year hiding spot.

It will go hyperbolic into the earth shattering Kaboom......

Wait till someone has the stones to throw a 25 billion dollar short into the market all at once leveraged up with Vix options.....

HungryPorkChop's picture

VIX is more rigged than a game of Three Card Monty. 

Arnold's picture

A lot of those correlating points are pre Skynet.

syzygysus's picture

True, the PPT has a quantum computer and they are front running knowing all possible outcomes...

Arnold's picture

Would you like fries with that?

syzygysus's picture

Yes, there are no potatos.

gatorengineer's picture

But the Solyent sticks are particularly delicious today.

NoWayJose's picture

It's great if you catch the last one / but I see a bunch of these indicators tracking the S&P much higher over a fairly long period.

SomethingSomethingDarkSide's picture

Indicators? Boy, you better get learned up. It's 100% psychology & game theory.  The players?  Bankers that want more wealth and stellar careers.  The game?  Every market wanting to implode.  One just has to assume which points they ease, waffle, or become hawkish and trade accordingly.

analyst123's picture

err... more articles from someone who is absolutely clueless about how vix works... its almost embarrassing...

SomethingSomethingDarkSide's picture

Dana Lyons ain't so bad, relatively speaking

buzzsaw99's picture

do you see what happens larry? [/The Big Lebowski]

nice fucking model. [/Beetlejuice]

Catullus's picture

I'd really it's rolling forward puts.

YellenTheft's picture

Could it be that smart money is starting to take caution and hedge and the rise in the market lately is because of retail money poring in? It seems that way because Usd/Jpy is falling and Bonds and then VIX is rising even on strong US macro data and rising markets. This could mean that we are in the euphoric phase of a stock bubble and that we don't have so many more months left of this BULLmarket. Fundamentally I think it will be the rise in inflation and therefore interest rates that sinks this ship!

gatorengineer's picture

Everything says the consumer is tapped out.....  everything is waiting and assuming Monumental infrastructure spending, and corporate tax cuts.....  

Fake Trump's picture

A BLACK SWAN IS COMING!! From where? Trump's ass of course. He will blow them (stock markets) up within 30 days from now. Soros will be pleased. Trump can't beat Soros in this game. Don't forget Soros broke The Bank of England.

syzygysus's picture

ehh, this isn't Trump's stock market, he inherited it.


so your post is shit.

BlueHorseShoeLovesDT's picture

UH Soros just went long financials in a big way

DTP's picture

Deleveraging of inverse vol ETFs and exploding deltas are what may cause the potential "accident" described by JPM yesterday- they are what has changed over the last few years- inverse VIX ETFs didn't exist prior to 2010, and they have changed VIX pricing inputs in terms of extremes, up and down 

LawsofPhysics's picture

yes, yet another layer of gambling added to the "market"...


...when this casino goes belly-up, it's going to be epic.

BlueHorseShoeLovesDT's picture



Always ready to take one for the team.

timehill's picture

The TRIN was rising into the close yesterday while the S&P also rose into the close.  These "Generally" work in opposition!

pebblewriter's picture

It's the same old manipulation that has been going on for ages.


VIX has been stuck in a falling channel for the past two months.  When they want SPX to drop a little, they let VIX "break out" until SPX gets where they want it, then VIX is smashed back to an "acceptable level" -- usually below support of some kind.  The algos see this and respond in kind. 

This morning, VIX reversed back below the falling channel top in order to stall the decline. Now, it's climbing back towards the channel top in order to get SPX down to where they want it.  Combined with CL and USDJPY, it's all about driving the algos.


BlueHorseShoeLovesDT's picture

Intersting but I looked at your stuff you acknowledge it and then try to fight it?