What to Make of the VIX's Recent Losing Streak

Also, how the SPX tends to react to such streaks from Wall Street's "fear gauge"

Senior Quantitative Analyst
Nov 15, 2023 at 8:00 AM
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The Cboe Market Volatility Index (VIX) recently fell eight days in a row, which is a rare occurrence. The VIX is the market’s expectation of volatility over the next 30 days for the S&P 500 Index (SPX). It’s often referred to as a "fear gauge" because it typically moves in the opposite direction as the market. This week, I’m looking at how the VIX and how the market typically perform after these streaks.

VIX 8 Straight Down Days

The table below shows all the dates since 1993 in which the VIX was down eight days in a row. This recent occurrence is just the 10th time, with the first occurring in 2004 and the last time in 2015. The SPX was up 6.4% during the most recent eight-day streak, which puts it in the middle of the range.

Stocks historically perform well after 8-day streaks, with the SPX averaging a 1.32% return over the next couple of weeks and 2.58% over the next month. The index was up eight of nine times in these time frames. The SPX tended to pull back, however, after the first month as the three-month average return was 1.26%.

SPX_VIX Returns


This next table shows the same dates when the VIX was down eight days in a row, but the returns are for the VIX. As you would expect, with the SPX showing outperformance over the next month, the VIX tends to fall. The VIX was up just once in the following month, out of nine signals, averaging a decline of 6.28%. But then three months after these signals it was up over 25% on average, then about flat six months later. For a study like this, I focus more on shorter timeframes, because how much affect can just eight days of trading have over the next six months?

VIX Returns

7-Day Streaks

To get more data points, I summarized the data following seven straight days of VIX declines, which, of course, also happened recently. Using this as a signal gives up 24 data points and it’s still a short-term buy signal for the SPX. The index averaged a gain of 2.36% over the next month with 92% of the returns positive. The typical one-month return for the S&P 500 has been 0.73%.

SPX Returns

Next, I have a table of VIX returns after it lost seven days in a row. The VIX, again, tends to fall in the short term.

VIX_7 Day


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