VIX vs S&P500 A simple correlation for buy/sell signals

6 de ago. de 2021

VIX has been trading within a Channel Down since late April 2020 after the markets started to correct themselves following the COVID led March 2020 crash.

I have plotted the S&P500 on the chart and as you see from the comparison, the pattern is quite useful in determining when to sell stocks and when to buy. When VIX enters its Lower Lows zone, S&P500 starts to correct. If not immediately, then at least some days after it records a lower low from its previous price. Exception is August 6, 2020 when after the VIX hit the Lower Lows zone of the Channel Down, S&P500 continued to rise but still dropped lower than the VIX hit point even though it took it around 1 month to do so.

At the same time, when the VIX hits the Lower Highs zone of the Channel, it represents an optimal opportunity to buy stocks as it where S&P roughly makes its bottom.

Right now VIX is coming off a (near) Lower High and still has some way to go before hitting the Lower Lows Zone. This indicates that S&P should continue to rise, at least for the current month. Of course every pattern can be broken and this one will at some point but it is a fact that for over 1 year it has been giving the most consistent buy/ sell signals. Until it gets invalidate, the trend is your friend.



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