Positive correlation between S&P 500 and VIX

Discussion in 'Trading' started by jimmyjazz, Nov 30, 2017.

  1. Today is one of those days . . . the VIX and the S&P 500 seem to be tracking very closely. While rare, I've seen it happen before.

    What is the meaning of this? Ordinarily, the VIX drops when the S&P climbs, but not always. Are there any studies I could read that discuss what might be inferred from this correlation? Is it a harbinger of an impending market turn? A nothing-burger? Other?
  2. It generally happens right before periods of uncertainty... leading up to Brexit it happened on some days.. leading up to election.. sometimes leading to a FED meeting... in this case perhaps it has to do with the tax bill.

    The market has climbed a lot the past few days, meaning the market is a bit stretched in the short term. Therefore, VIX climbs in anticipation that we can't go much higher and that some selling will happen soon....

    Does it sometimes lead to increased realized volatility/sell off?.. sometimes... other times the VIX increase simply dissipates over a few days while the market stays flat or drops a fraction of a percent..
    Stocktracker and d08 like this.
  3. toc


  4. Hope (the S&P), but not certainty (the VIX) about the senate.
  5. The VIX is a measure of basically...unexpected craziness in the market.
    When the market generally moves unexpectedly in a direction rather violently or suddenly...the VIX will spike up.

    Follow or watch this on a daily time scale, in relation to the SPY. You'll kind of grasp a sense of it.
    I like to think of it as more of a Complacency or group-think measure. It could also be used as a "harbinger" tool as well.

    You need a dynamic, variable mind to succeed in the market and trading. -- Nothing is black or white or etched in stone.
    To build a house you need tools and fixed plan; with the market...you need a collection of tools and considerations, and no fixed plan.
    Last edited: Nov 30, 2017
  6. SteveM


    Goldman speaketh with a forked-tongue? Their boy wonder David Kostin coined Wall Street's favorite new buzz-term "rational exuberance" just last week to justify another 11% up in the SPY in 2018.
  7. toc


    Guess you are right, one wonder kid says "up" and another slick boy says "down".

    End of the game, Goldman sachs wins no matter which direction the market goes.


    Goldman says so many investors are expecting a market correction that means it likely won't happen
    • Goldman Sachs strategist David Kostin said subdued optimism and a strong consumer will stand in the way of a stock market correction.
    • Kostin has a 2,400 target on the S&P 500 this year, implying a 2.5 percent decline from Friday's close.
    • Pessimists worry that stretched valuations, tighter Fed policy and other factors will lead to a correction.
    SteveM likes this.
  8. I've been doing this for years, and it feels like today was an outlier. VIX tracked the market almost perfectly. It climbed like a mother as the index climbed and then both peaked just before 1 PM ET, plummeting from there. I can understand the argument that VIX spiked as S&P spiked "too much", but then the index retreat should have induced further fear. Instead, it appeared to relieve fear, which doesn't make much sense.
  9. good catch, I noticed this realtime

    I suspect it was because ...... oops. if I tell you , I'd have to....

    Ok, I think its because all the real money is in bitcoin now, and stocks are just something you buy with the bitcoin you've already bought,

  10. The VIX tracks the volatility future /VX. If you get some big boy buying and selling in the /VX futures it can move the VIX independently regardless of what the S&P is doing.
    #10     Nov 30, 2017