Market Analysis

$VIX Correlation

Are you not entertained? Markets are extending records day after day and I’ve been posting some pretty wild relative strength chart readings on my twitter feed. These are of interest from a historic perspective as they inform us that we are witnessing the most once sided price action in history.

Volatility compression remains the name of the game and this week’s brief mini dip lasted only minutes into the open. The end of the line?

The 200 MA on the $VIX:

It all remains rather precise and in this context it is notable that $VIX has actually shown some relative strength in the face of market being on a tear.

I know, “relative strength” with $VIX below 10? No really we haven’t even seen the $VIX tag its lower trend line and perhaps they will do at close today. After all it’s $VIX crush Friday, but even today we can see the $VIX rising as markets are printing new highs.

But there’s one chart that suggests something more may be going on, the correlation between $VIX and $SPX:

In the past correlation spikes have resulted in eventual $SPX weakness, in some case serious corrective moves. As dips have all but disappeared from markets perhaps this spike here means nothing. But note we had a similar spike and RSI reading in February 2017. It ended producing a move toward the 50MA. $SPX hasn’t touched its 50MA since August 2017.

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4 replies »

  1. great work Sven, do you believe this is the final wave up, whereby the market top occurs with a peak in momentum, or do you believe we need months of divergence, and breadth decay?

  2. Your charts are great, and I really appreciate your tweets. The only thing I don’t like is that your usually way to early, and market’s usually has strength left. Could you work on better timing for your signals. Thanks


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