When I hosted Vol 411 this morning both the S&P 500 and VIX were higher on the day. The SPX took a turn and finished the day lower so we didn't have a three day streak where both rose. The results of running some numbers is below the video.
As a follow up to today’s Vol 411 show I updated my numbers on the following two tables. First, I took a look at the number of times since January 1990 through last Friday that both the S&P 500 and VIX have moved in the same direction. Note the number is just over 20% for both the S&P 500 and VIX rising together and the S&P 500 and VIX dropping on the same day.
In the past I’ve also noted that when VIX is at lower level there is a higher likelihood that the S&P 500 and VIX will move in the same direction each day. This second table shows that when VIX is below 13, both SPX and VIX have moved higher just over 27% of trading days and both have dropped almost 32% of observations. The short story is when VIX is low the S&P 500 and VIX move together a little more often.
Finally, I did some new work and checked out how often we have had streaks where the S&P 500 and VIX both rise multiple days in a row. The longest streak is only four days and that has happened only three times. We’ve had eleven three day streaks. The table below shows these various streaks and explores if there’s a pattern to what happens in the stock market after both have been rising more than two days in a row. The table shows, 5-day, 10-day, and 20-day performance for the S&P 500 after these streaks have come to an end.
There appears to be a little more red on this table than if we had picked fourteen random 5-day, 10-day, and 20-day S&P 500 performance periods, but nothing that should have investors running for the exits when VIX moves up in line with the S&P 500 for three or four consecutive days.
One final note, if both had finished the day higher (as they were this morning) today this will be the third day in a row that both have moved higher. Despite this being a bit of anomaly, history tells us this would have been nothing to get too excited about.