The VIX Just Did This for the First Time Since the Financial Crisis

The CBOE Volatility Index (VIX) hasn't suffered a six-week losing streak since August 2008

by Andrea Kramer

Published on Aug 9, 2016 at 2:07 PM

The CBOE Volatility Index (VIX) just hit an annual low of 11.12, and has dropped more than 55% since its post-"Brexit"-vote peak of 26.72 on June 27 (a day the VIX ultimately closed lower with stocks, triggering a signal not seen since April 2009). In fact, the market's "fear gauge" hasn't closed higher for more than two straight days since its five-day winning streak in mid-June, and just wrapped up its worst six-week stretch since the height of the financial crisis, in August 2008. But what could the VIX's weekly losing streak mean for the S&P 500 Index (SPX)

Going back to 1990, this is just the fifth time ever the VIX has suffered a six-week losing streak, the last time being nearly eight years ago, mid-recession. The current streak has been the worst ever for the VIX, resulting in a 55.8% decline, according to Schaeffer's Senior Quantitative Analyst Rocky White. The S&P, meanwhile, has surged to record highs, rallying 7.1% -- in the middle of the pack, as far as historic returns during VIX plunges.


Following the last VIX six-week losing streak, it was a pretty brutal time for the SPX -- though again, that was in the heart of the financial crisis. The S&P was down 3.9% two weeks later, while the VIX had bounced back 22.6%. Going out even further, the S&P was 38.1% lower three months after a VIX signal, while the VIX itself had nearly quadrupled.

Averaging S&P returns after the past four VIX signals, it doesn't look pretty at any of the near-term checkpoints. However, the numbers are heavily skewed by the ugly stretches in 2001 and 2008. After the VIX signals in 1992 and 2003, the S&P actually muscled higher in the near term. At the same time, the VIX has averaged a positive return at each checkpoint, up nearly 77% three months post-signal, though that's also heavily skewed by 2008.


In conclusion, the sample size is really too small to draw any solid conclusions about where the S&P might be headed after this last VIX losing streak. However, if large speculators in the VIX futures market are wrong again, we could be at risk of a volatility pop.


Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!

A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!



NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories

The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.
Wall Street Roars Higher Amid Civil Unrest
Investors weighed a mixed bag of jobs data
AstraZeneca Stock Flat Despite COVID-19 Vaccine News
AstraZeneca saw a rise in capacity for its COVID-19 vaccine candidate
The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.