Volatility and SPX Price Advance
A striking trend has emerged recently: despite the S&P 500 index's consistent gains, there has been a concurrent rise in the Volatility Index (VIX), which typically moves inversely to the market. This simultaneous increase might signal growing investor apprehension amidst seemingly bullish market conditions.
SPX and VIX, February-March 2024
It turns out that this type of unusual relationship between the S&P 500 index and the VIX indicator has been observed in the past. When the S&P 500's rise was accompanied by an increase in the VIX, it often signaled impending market corrections or even transitions into bear markets. This trend, highlighted by past data, emphasizes the critical nature of closely watching these indicators for early signs of market adjustments. The following charts exemplify this correlation, showcasing the potential impact on the market following such patterns.
SPX and VIX, January 2018
SPX and VIX, October 2018
SPX and VIX, February 2020
SPX and VIX, January 2022
What's Next?
A potential deeper market correction hinges on the S&P 500's movement relative to the 5000 threshold. Having recently surpassed this significant benchmark, any subsequent fall below this level could trigger psychological selling pressure. This scenario underlines the importance of the 5000 mark as both a psychological and technical pivot point, suggesting that its breach could significantly influence market sentiment and investor behavior.
SPX, daily
